Are costs really sticky and biased? Evidence from manufacturing listed companies in China

Recent studies on cost behaviour have proved that cost increase caused by business expansion is larger than cost decrease caused by business downsizing. This cost stickiness behaviour contradicts the traditional theoretic assumption that cost level and business size change in a linear way. This arti...

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Bibliographic Details
Published in:	Applied economics 2017-11, Vol.49 (55), p.5601-5613
Main Authors:	Xu, Jian, Sim, Jae Woo
Format:	Article
Language:	eng
Subjects:	Accounting Behavior Bias Business Cost accounting Cost analysis cost behaviour Cost control Cost stickiness Downsizing Earnings management Economic analysis Economic growth Economic theory Manufacturing manufacturing listed company Size of enterprise
Online Access:	Get full text
Tags:	Add Tag accounting 1 management 1

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Summary:	Recent studies on cost behaviour have proved that cost increase caused by business expansion is larger than cost decrease caused by business downsizing. This cost stickiness behaviour contradicts the traditional theoretic assumption that cost level and business size change in a linear way. This article investigates the existence or non-existence of cost stickiness using a sample of China's manufacturing listed companies during the period 2010-2014. First, our findings show that cost stickiness is a pervasive phenomenon and overestimated in the manufacturing industry. Second, we find that cost stickiness varies greatly across industries and in different regions. Finally, we find that cost stickiness is affected by the economic growth. Specifically, cost stickiness increases with the macroeconomic growth. Our results from China's manufacturing listed companies provide evidence on asymmetric cost behaviour and contain important implications for both cost accounting research and financial accounting research.
ISSN:	0003-6846 1466-4283