The relationship between earning management incentives and cost stickiness: Empirical evidence Egypt | ||
| مجلة البØوث التجارية | ||
| Article 9, Volume 42, Issue 4, October 2020, Pages 55-80 PDF (584.25 K) | ||
| Document Type: تجاریة کل ما یتعلق بالعلوم التجاریة | ||
| DOI: 10.21608/zcom.2020.132851 | ||
| Author | ||
| Ù…Øمد السيد Øسونة* | ||
| قسم المØاسبة، کلية التجارة، جامعة الزقازيق، مصر | ||
| Abstract | ||
| Abstract This study investigates the relationship between managerial incentives to earnings management and cost stickiness. I argue that when managers have incentives to earnings management, they tend to increase costs less for an increase in sales and to aggressively cut resources for a decrease in sales and thus cost stickiness decreases. Three proxies are used for management incentives to earnings management; namely management incentive to avoid loss, incentive to avoid earning decrease, and incentive to avoid loss and/ or earning decrease. A sample of 940 firm-year observations of non-financial firms listed in the Egyptian Stock Exchange from 2011 to 2017 is used. The results support my hypotheses and I find that when managers have incentive to manage earnings, costs exhibit an anti-sticky behavior. These results shed light on the role of motivations underlying managerial decisions in affecting firms’ cost behavior. | ||
| Keywords | ||
| Keywords: Cost stickiness; cost anti-stickiness; cost behavior; earnings management incentives; accruals constraints; real activity management | ||
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