Oxford Plastics Company
Sticky cost behavior: Evidence from small and medium sized companies
Nicola Dalla Via* RSM Erasmus University Rotterdam Paolo Perego RSM Erasmus University Rotterdam
1 February 2013
Abstract: This paper investigates whether cost stickiness occurs in small and medium sized companies using a sample of Italian non-listed and listed firms during the period 1999-2008. Our findings show that cost stickiness emerges only for the total cost of labor and not for the selling, general, and administrative (SG&A) costs, the cost of goods sold and the operating costs. Stickiness of the operating costs is only detected in the sample of listed companies. We further contribute to the literature on sticky cost behavior by discussing critical issues associated to the extant approach of empirical analysis and interpretation of sticky cost behavior.
Key words: Cost stickiness; Cost behavior; Cost asymmetry; SMEs; Italian firms JEL Classification: M41
* Corresponding author: RSM Erasmus University Department of Accounting & Control Burgemeester Oudlaan 50 3062 PA Rotterdam The Netherlands Tel.: +31 10 4081199 E-mail address: dallavia@rsm.nl
Acknowledgments: The authors would like to thank the anonymous referee and participants at the 10th Manufacturing Accounting Research Conference, Ghent, June 2010 and the European Accounting Association Annual Congress, Ljubljana, May 2012 for their helpful comments.
Electronic copy available at: http://ssrn.com/abstract=2226399
1. Introduction Over the last decade, research in management accounting has challenged the fundamental assumption that cost behavior is symmetric for activity increases and decreases. Starting from the first empirical study by Anderson et al. (2003), considerable academic interest has focused on the short-run asymmetric response to activity change or cost stickiness. Costs behave as sticky when they raise more with increases in activity volume than they fall with decreases of the same amount. Despite a
Nicola Dalla Via* RSM Erasmus University Rotterdam Paolo Perego RSM Erasmus University Rotterdam
1 February 2013
Abstract: This paper investigates whether cost stickiness occurs in small and medium sized companies using a sample of Italian non-listed and listed firms during the period 1999-2008. Our findings show that cost stickiness emerges only for the total cost of labor and not for the selling, general, and administrative (SG&A) costs, the cost of goods sold and the operating costs. Stickiness of the operating costs is only detected in the sample of listed companies. We further contribute to the literature on sticky cost behavior by discussing critical issues associated to the extant approach of empirical analysis and interpretation of sticky cost behavior.
Key words: Cost stickiness; Cost behavior; Cost asymmetry; SMEs; Italian firms JEL Classification: M41
* Corresponding author: RSM Erasmus University Department of Accounting & Control Burgemeester Oudlaan 50 3062 PA Rotterdam The Netherlands Tel.: +31 10 4081199 E-mail address: dallavia@rsm.nl
Acknowledgments: The authors would like to thank the anonymous referee and participants at the 10th Manufacturing Accounting Research Conference, Ghent, June 2010 and the European Accounting Association Annual Congress, Ljubljana, May 2012 for their helpful comments.
Electronic copy available at: http://ssrn.com/abstract=2226399
1. Introduction Over the last decade, research in management accounting has challenged the fundamental assumption that cost behavior is symmetric for activity increases and decreases. Starting from the first empirical study by Anderson et al. (2003), considerable academic interest has focused on the short-run asymmetric response to activity change or cost stickiness. Costs behave as sticky when they raise more with increases in activity volume than they fall with decreases of the same amount. Despite a
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