A Review and Synthesis of 'Cost Stickiness' Literature
41 Pages Posted: 10 Jun 2013
Date Written: November 9, 2012
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
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