Selling, General, and Administrative Cost Behavior of Family Firms

45 Pages Posted: 11 Dec 2019

See all articles by Menachem (Meni) Abudy

Menachem (Meni) Abudy

Bar-Ilan University - Graduate School of Business Administration

Efrat Shust

The Department of Management and Economics, The Open University of Israel

Date Written: November 24, 2019

Abstract

This paper investigates whether family ownership affects selling, general and administrative cost behavior. We find that family firms exhibit anti-sticky cost behavior, as opposed to non-family firms that demonstrate cost stickiness. This result is robust to alternative definitions of family firms. The results are also preserved for a subsample of firms that switched ownership status (i.e., from family owned to non-family owned and vice versa). Further inquiry reveals that anti-sticky cost behavior is focused in family firms with active family involvement, that is, where the family member serves as an officer or chairperson of the firm. Finally, we test the effect of other known determinants of asymmetric cost behavior and find that managers’ optimism mitigates anti-sticky cost behavior and that successive sales decrease does not affect this behavior.

Keywords: Cost behavior, cost stickiness; cost anti-stickiness; family ownership; agency problems.

JEL Classification: D22, D24, G32, L42, M41

Suggested Citation

Abudy, Menachem (Meni) and Shust, Efrat, Selling, General, and Administrative Cost Behavior of Family Firms (November 24, 2019). Available at SSRN: https://ssrn.com/abstract=3492541 or http://dx.doi.org/10.2139/ssrn.3492541

Menachem (Meni) Abudy

Bar-Ilan University - Graduate School of Business Administration ( email )

Ramat Gan
Israel

Efrat Shust (Contact Author)

The Department of Management and Economics, The Open University of Israel ( email )

Israel

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