Asymmetric Cost Behavior

60 Pages Posted: 20 Aug 2013 Last revised: 13 Aug 2015

See all articles by Rajiv D. Banker

Rajiv D. Banker

Temple University - Department of Accounting

Dmitri Byzalov

Temple University - Fox School of Business and Management - Department of Accounting

Date Written: June 16, 2014

Abstract

We synthesize the growing literature on asymmetric cost behavior — a new way of thinking about costs and, by extension, earnings. While the traditional cost behavior model describes a mechanistic relation between activity and costs, this alternative view recognizes the primitives of cost behavior — resource adjustment costs and managerial decisions. These primitives give rise to “sticky” and “anti-sticky” costs, along with traditional “fixed” and “variable” costs as extreme cases. We formulate an integrated framework of asymmetric cost behavior and review the empirical evidence in support of this framework and its implications for both cost and financial accounting research. We clarify empirical issues and show that recent contrary claims about the validity of findings in the literature are unwarranted because of econometric errors. We present new comprehensive evidence from Global Compustat, which demonstrates that asymmetric cost behavior is a pervasive global phenomenon. We also discuss research opportunities.

Keywords: cost stickiness and anti-stickiness, resource adjustment costs, managerial decisions

JEL Classification: M41, D21, D24

Suggested Citation

Banker, Rajiv D. and Byzalov, Dmitri, Asymmetric Cost Behavior (June 16, 2014). Journal of Management Accounting Research, Vol. 26, No. 2, 43-79, 2014. Available at SSRN: https://ssrn.com/abstract=2312779 or http://dx.doi.org/10.2139/ssrn.2312779

Rajiv D. Banker (Contact Author)

Temple University - Department of Accounting ( email )

Philadelphia, PA 19122
United States

Dmitri Byzalov

Temple University - Fox School of Business and Management - Department of Accounting ( email )

Philadelphia, PA 19122
United States

HOME PAGE: http://astro.temple.edu/~dbyzalov/

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