Management Accounting Section Midyear Meeting

Decomposing Cost Asymmetry: The Role of Global Risk Preferences

• In Event: Cost Stickiness

Abstract

A growing body of accounting research documents an asymmetric behavior of costs, implying that costs rise more in response to revenue increases than they drop for revenue decreases. This cost behavior is ascribed to managerial decisions on resource commitment. In this study, we further explore this asymmetry by decomposing it into resource adjustments following sales increases and sales decreases and develop hypotheses on how these may be affected by varying risk preferences across countries. To test our hypotheses, we use panel data on 3,558 companies across nine industry sectors from 26 countries around the world over the period of six years (2008-2013). We contribute to existing literature on asymmetric cost behavior in considering the role of risk preferences in different domains as well as the role of industry performance as a reference point for managerial decision-making on resource commitment.

Authors

• Aleksandra Klein, WU Vienna

• Thomas Lindner, WU Vienna

• Markus Wabnegg, WU Vienna