Stakeholder Orientations and Cost Management

50 Pages Posted: 19 Aug 2013 Last revised: 18 Oct 2017

See all articles by Xiaotao Kelvin Liu

Xiaotao Kelvin Liu

Northeastern University - Accounting Group

Xiaoxia Liu

Hohai University

Colin Reid

Washington and Lee University - Williams School of Commerce, Economics, and Politics; Northeastern University - Accounting Group

Date Written: October 17, 2017

Abstract

We examine the effect of stakeholder orientation on firms’ cost management as proxied by Selling, General and Administrative (SG&A) cost stickiness. Using a sample of 19,783 firm-years, we find that customer and employee orientation are associated with greater SG&A cost stickiness. Furthermore, the effect of customer orientation on SG&A cost stickiness is more prominent in firms where SG&A costs create high future value, growth firms, and firms with strong corporate governance. In contrast, the effect of employee orientation on SG&A cost stickiness is stronger in firms where SG&A costs create low future value, mature firms, and firms with weak corporate governance. Overall, the association between customer orientation and SG&A cost stickiness is consistent with efficiency considerations (i.e., adjustment costs). In contrast, the association between employee orientation and SG&A cost stickiness is consistent with agency motives such as empire building or “a preference for a quiet life.” In sum, we provide evidence that corporate orientation toward different stakeholders can have different efficiency implications in the context of SG&A resource adjustments and cost management.

Suggested Citation

Liu, Xiaotao Kelvin and Liu, Xiaoxia and Reid, Colin, Stakeholder Orientations and Cost Management (October 17, 2017). Contemporary Accounting Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2311501 or http://dx.doi.org/10.2139/ssrn.2311501

Xiaotao Kelvin Liu (Contact Author)

Northeastern University - Accounting Group ( email )

404B Hayden Hall
360 Huntington Avenue
Boston, MA 02115
United States
617-373-5926 (Phone)

Xiaoxia Liu

Hohai University ( email )

8 Focheng West Road
Jiangning District
Nanjing, Jiangsu 211100
China

Colin Reid

Washington and Lee University - Williams School of Commerce, Economics, and Politics ( email )

Lexington, VA 24450
United States

Northeastern University - Accounting Group ( email )

360 Huntington Ave.
Boston, MA 02115
United States

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