The Effect of Generalized Trust on Cost Stickiness: Cross-Country Evidence
The International Journal of Accounting (TIJA), Forthcoming
48 Pages Posted: 17 May 2019
Date Written: April 2, 2019
We investigate the impact of an informal social attribute on cost behavior. More specifically, we examine the effect of generalized trust (trust in others) on cost stickiness. Using a large international sample from 44 countries, we find that generalized trust significantly increases cost stickiness. Important rationales for this result are that managers in more trusting societies are more optimistic as well as committed to stable, long-term employment relationships. This study makes a significant contribution in understanding cost stickiness differences across the globe. Our results further complement prior research which has found, to the contrary, that trust and cost stickiness are negatively associated at the local level. Hence, our study corroborates the importance of distinguishing between local social capital and global generalized trust concerning their effect on economic outcomes.
Keywords: Cost Behavior, Trust, Social Capital, National Culture, Societal Attribute
JEL Classification: A13, M40, M41
Suggested Citation: Suggested Citation