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Cost Structure and Sticky Costs

Posted: 3 Mar 2010 Last revised: 7 Nov 2014

Ramji Balakrishnan

University of Iowa - Department of Accounting

Eva Labro

University of North Carolina Kenan-Flagler Business School

Naomi S. Soderstrom

University of Melbourne

Date Written: May 2014


Beginning with Anderson, Banker, and Janakiraman (2003), a rapidly growing literature attributes the short-run asymmetric cost response to activity changes (i.e., sticky costs) as 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 for how future research might control for the effects of cost structure. Empirically, we find that cost structure confounds results usually interpreted as cost stickiness reflecting short-run managerial actions. After adjusting for the effects of fixed costs, we find that the results are unstable across alternate sub-samples. Our results provide evidence that long-run cost structure decisions impact our ability to detect short-term cost management decisions.

Keywords: Sticky costs, cost structure

JEL Classification: M41, L42

Suggested Citation

Balakrishnan, Ramji and Labro, Eva and Soderstrom, Naomi S., Cost Structure and Sticky Costs (May 2014). Journal of Management Accounting Research, Forthcoming. Available at SSRN: or

Ramji Balakrishnan (Contact Author)

University of Iowa - Department of Accounting ( email )

108 Pappajohn Business Building
Iowa City, IA 52242-1000
United States
319-335-0958 (Phone)
319-335-1956 (Fax)

Eva Labro

University of North Carolina Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
(919) 962-5747 (Phone)

Naomi Soderstrom

University of Melbourne ( email )

Melbourne, 3010

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