Essay on the stickiness of selling, general, and administrative cost

Abstract

This paper provided evidences that costs management is affected by many factors and investors can use this knowledge to analyze the firm’s cost management practices. Selling, General, and Administrative Costs (SG&A) appears to be sticky and showed that costs management is asymmetric. The cost stickiness occurs when the SG&A costs decrease by smaller percentage with revenue decrease compare to SG&A costs increase with revenue increase. This paper explored various factors that might have influence on the stickiness of SG&A costs using linear regression. Factors such as managerial ownership and ownership concentration are found to decrease cost stickiness in different periods. Firms within service industry are found to have significantly greater SG&A cost stickiness compare to other industries. Good corporate governance is also found to increase SG&A cost stickiness.