Implications of asymmetric cost behaviour for analysing financial reports of companies in China

Abstract

Asymmetric cost behaviour analysis emphasises the role of deliberate managerial decisions. In this paper, we find that asymmetric cost behaviour is also a pervasive phenomenon in China. Specifically, SOEs have more cost stickiness than non-SOEs and companies with executive shareholding have more cost stickiness than those without executive shareholding. Secondly, we find that the cost variability and cost stickiness model (separate earnings into cost variability with sales revenue and stickiness in costs with sales declines) provides substantial improvement in forecasting accuracy over other models using only the line items in financial statements. Finally, we find that both conditional conservatism and cost stickiness influence the linear relation between earnings and performance measures. We suggest that future empirical tests on conditional conservatism should control for the potential confounding effect of sticky costs. Our results from Chinese firms provide evidence on the accuracy of earnings forecast and conservatism, and contain important implications for both cost accounting research and financial accounting research.

Sticky Cost Behavior: Evidence from BRICS+T Countries

“…Last but not least, in this study, which examines the economic growth of countries, that is, the effect of GDP on cost stickiness, it has been determined that the level of cost stickiness also raised as expected in the periods when GDP raised. The results are consistent with Anderson et al (2003), Banker and Byzalov (2014), Kim and Wang (2014), Bu et al, (2015).…”

“…In addition to the correlation between firm characteristics and sticky cost behavior, there are studies in literature conducted to test the relationship between economic growth, which is one of the macroeconomic indicators, and sticky cost behavior (Anderson et al, 2003;Abu-Serdaneh, 2014;Banker and Byzalov, 2014;Kim and Wang, 2014;Bu et al, 2015;Lee and Chiang, 2018;Yang, 2019). Cost stickiness is expected to rise at times of economic growth (Anderson et al, 2003;Banker and Byzalov, 2014;Kim and Wang, 2014;Bu et al, 2015: 10).…”

State Ownership, Socio-political Factors, and Labor Cost Stickiness

“…First, we contribute to cost stickiness literature by examining SOEs' cost behavior in 22 European countries. Although Bu, Wen, and Banker (2015) have analyzed the effect of state ownership on cost stickiness, their study is limited to China, with its unique institutional features. 1 Our cross-country data enable us to incorporate the effects of country-level variables, which is relevant because SOE behavior relates closely to country-level socio-political and institutional characteristics.…”

Respon Investor Terhadap Pengumuman Laba Industri Perbankan Yang Menghadapi Kos Stickiness

“…Untuk itu diperlukan pemahaman terhadap perilaku kos guna meningkatkan akurasi prediksi laba terutama pada saat penjualan mengalami penurunan (Ciftci et al, 2016). Pemahaman yang lebih baik tentang variabilitas kos dan kos stickiness akan meningkatkan ketepatan prediksi laba (Bu et al, 2015). Sebaliknya, kurangnya pemahaman terhadap perilaku kos menyebabkan rendahnya penyesuaian terhadap perubahan kos sehingga menimbulkan kesalahan yang sistematis dalam prediksi kos (Kim & Prather, 2010).…”