This study on cost behavior reveals that cost stickiness is a behavioral characteristic of costs in relation with activity change. It indicates that costs increase more when activity rises than they decrease when activity falls by the equivalent amount. This study formulates two main and eight subsidiary hypotheses. To validate them, data of 86 companies listed in Tehran stock exchange was selected using systematic deletion method for a 7-year period, i.e. from 2008 to 2014. Eviews and Minitab were used to assess the hypotheses and to analyze derived data. According to findings, the relationship of the number of employees, the amount of current assets, the amount of fixed assets and the amount of debts with SGA (selling, general and administrative) costs and cost of goods sold is sticky in the studied firms.
The main aim of a commercial firm is to provide its customers with prodcuts or services at a given time, to make money and to bear costs with a rational profitability in long-term. Managers need pre-detrmined costs in planning process in order to be able to forecast profitability. The amount of pre-determined costs can be defined by determining the behavior of such costs to sales revenue. It can be argued, indeed, that by establishing a conncection between cost and revenue, the cost change can be identified via sales revenue change.
The results of this study agree with those of Sepasi et al (2014), Zanjirdar et al (2014), Namazi et al (2012), Ghaemi and Nematollahi (2006), Kent et al (2005), Namazi and Davanipour (2010), Anderson et al (2003), Medrios and Kushta (2004), Benker et al (2010) and Anderson and Anderson and Jaimovich (2012) studies.According to results, the rejection of some main hypotheses of this study in other studies may root in the differences between samples and industries, no efficacy of Tehran stock exchange and Iranian special exonomnic condition in recent years. In some cases, it may root in differences of study time and samples. Relying on the obtained results, the following suggestions are put forward:
- Considering the confirmation of the main hypotheses of the study approving that SGA costs and cost of goods sold are sticky, managers are suggested to take cost stickiness and its intensity into account in the process of planning and budgeting firms activities for forecasting future costs in order to deliver a more comprehensive budgeting and more accurate forecasting.
- Auditors and auditing institutes are suggested to discover any fraud or fault in financial statements considering cost stickiness and the change of cost with the rate of changes in sales revenue.
- The effect of macro-economic factors, including inflation and GDP growth, on cost stickiness should be studied.
- Cost stickiness should be studied separately for service, business and production firms or by separating special industries.
- The indices of agency theory and the effects of items such as the number of non-executive board members, percentage of governmental organizations share, the percentage of the first major shareholder share and the amount of managers’ share on cost stickiness should be studied.
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