Oxford Plastics Company

11575 WordsMar 26, 201347 Pages
Sticky cost behavior: Evidence from small and medium sized companies Nicola Dalla Via* RSM Erasmus University Rotterdam Paolo Perego RSM Erasmus University Rotterdam 1 February 2013 Abstract: This paper investigates whether cost stickiness occurs in small and medium sized companies using a sample of Italian non-listed and listed firms during the period 1999-2008. Our findings show that cost stickiness emerges only for the total cost of labor and not for the selling, general, and administrative (SG&A) costs, the cost of goods sold and the operating costs. Stickiness of the operating costs is only detected in the sample of listed companies. We further contribute to the literature on sticky cost behavior by discussing critical issues…show more content…
Further, the majority of prior studies in the cost stickiness literature rely on data from listed companies based in the United States. Our study is the first that we are aware of that documents cost stickiness in Italian firms, thereby adding to our understanding of cost behavior in a developed economy previously not examined. Third, we propose an overview of the literature in which we highlight the key dilemmas from the extant debate and the research approach adopted by past studies. The empirical part of our study employs data collected from the financial statements of Italian companies in the period 1999-2008. The sample includes companies belonging to the manufacturing and trading industry, while we additionally examine a sample of listed companies for comparative purposes. We conduct several tests of cost stickiness for different typologies of costs and a variety of determinants. Our findings document the presence of stickiness only for the total cost of labor, whereas stickiness of the operating costs emerges only in the sample composed by listed companies. Our results are aligned with prior findings only when listed companies are examined. However, when we apply the same tests to SMEs, the results are no more consistent with previous studies. The remainder of the paper is organized as follows. Section 2 provides a literature review aimed to position our paper in the extant debate on cost
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