Cost Stickiness and Investment Efficiency

OH,, H. (2022). Cost Stickiness and Investment Efficiency. The Journal of Industrial Distribution & Business, 13(1), 11-21, https://doi.org/https://doi.org/10.13106/jidb.2021.vol13.no1.11

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Abstract

Purpose: This study predicted cost asymmetry as a determinant of investment efficiency, and empirically analyzed the relationship between cost stickiness and investment efficiency. Research design, data and methodology: Using a sample of 4,382 Korean firm-year observations over 2011-2017 period, I examined the relationship between cost stickiness and investment efficiency. Asymmetrical cost behavior is measured as model of Homburg and Nasev (2008) and model of Park, Koo, and Pae (2012). Investment efficiency is measured as Chen, Hope, Li, and Wang (2011)'s model. Results: Firms with cost stickiness are less efficient in their investment than firms with non-cost stickiness. In other words, cost stickiness is an empirical result that supports the previous research on cost decision-making from perspective of managers pursuing private benefits due to information asymmetry. Conclusions: By showing that the manager's decision-making on the cost behavior affects the investment efficiency corresponding to capital management, the implications for the mechanism for efficient capital management are provided. Through the empirical results, it was shown that the cost stickiness is a product of opportunistic cost decision-making due to information asymmetry, and it is to present evidence that expands the meaning of the causes of asymmetric cost behavior.

keywords: Cost Stickiness, Asymmetry Cost Behavior, Investment Efficiency, Overinvestment, Underinvestment

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Article Contents

Vol.13 No.1

Cost Stickiness and Investment Efficiency

Abstract

Reference

The Journal of Industrial Distribution & Business