Journal article

Cost structure and sticky costs

R Balakrishnan, E Labro, NS Soderstrom

Journal of Management Accounting Research | Published : 2014


ABSTRACT Beginning with Anderson, Banker, and Janakiraman (2003), a rapidly growing body of literature attributes the short-run asymmetric cost response to activity changes (i.e., sticky costs) resulting from short-run managerial choices. In this paper, we are agnostic on the theory of sticky costs. Rather, we focus on empirical tests of cost stickiness. We show that past decisions on cost structure, which determine the magnitude of costs controllable in the short-term, induce non-stationarity in the elasticity of Sales, General, and Administrative costs, affecting the interpretation of estimates from the standard specification used in the literature. We develop suggestions fo..

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