Earnings Quality and Asymmetric Cost Behavior: A Study of Indonesia Capital Market

Abstract

This study investigates whether earnings quality affects to asymmetric cost behavior, i.e., sticky cost of listed firms of Jakarta Stock Exchange (JKSE). This study analyzes 1032 year-firms observations during 2012-2019 periods. This study investigates earnings quality on listed firms of JKSE during the period of IFRS adoption in 2012 and implementation of sustainability reporting voluntarily. This study finds that earnings quality influence to cost stickiness is supported. However, earnings quality negatively influences cost stickiness. The result of this study indicates that there is likely the effect of IFRS adoption in 2012 and implementation of sustainability reporting voluntarily since 2010 from listed firms on the JKSE on its earnings quality. This result is consistent with study of Banker, Basu, Byzalov, &Chen (2016). So higher earnings quality, lower cost stickiness. This study contributes theoretically to the literature on financial accounting, management accounting and cost management related to the topic of asymmetric cost behavior on earnings characteristics. This research also contributes practically to the ability of earnings quality in listed firms of the JKSE to reflect information on their financial performance related to the earnings quality by investors and financial analysts.

The Types of Ownership and Sticky Cost: Evidence from Listed Firms of Indonesia Capital Market

“…For example, the firm's managers tend to do management earnings forecasts (Han et al, 2019). Martusa et al (2022) also give empirical evidence that earnings quality influence asymmetric cost behavior, especially cost stickiness.…”

“…The firms do not cut the cost of its employees when sales drop, then the firm will bear the unused capacity in its operations. Then prior study also stated that earnings quality influence cost stickiness (Martusa, Meythi, & Dharmawan, 2022).…”