A Review and Synthesis of 'Cost Stickiness' Literature

41 Pages Posted: 10 Jun 2013

See all articles by Mahfuja Malik

Mahfuja Malik

Boston University; Sacred Heart University

Date Written: November 9, 2012

Abstract

Traditional cost accounting holds the assumption that cost changes proportionately with activity. Anderson et al. (2003) show that cost increases more when activity rises than decreases less when activity falls by an equivalent amount, a behavior that they refer to as “cost stickiness”. By following Anderson et al. (2003) researchers investigate the determinants, consequences and different aspects of cost stickiness. However, some studies raise questions about the validity of the inference made by Anderson et al. (2003). Over the last few years many authors highlight some new aspects such as earnings forecasts error, agency problem and earnings management that relate to cost stickiness. The objective of this paper is to review and synthesize the growing body of research on cost stickiness. Lack of theoretical support, merely insights provided by the literature and some inconclusive findings suggest that there are ample research opportunities to improve the understanding in this area.

Keywords: Cost stickiness, Asymmetric cost behavior

Suggested Citation

Malik, Mahfuja, A Review and Synthesis of 'Cost Stickiness' Literature (November 9, 2012). Available at SSRN: https://ssrn.com/abstract=2276760 or http://dx.doi.org/10.2139/ssrn.2276760

Mahfuja Malik (Contact Author)

Boston University ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

Sacred Heart University ( email )

5151 Park Ave
Fairfield, CT 06432
United States

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