Does Managerial Ability Lead to Different Cost Stickiness Behavior? Evidence from ASEAN Countries

Mitha Dwi Restuti, Lindawati Gani, Elvia R. Shauki and Lianny Leo
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Mitha Dwi Restuti: Department of Accounting, Faculty of Economics and Business, Universitas Indonesia, Depok 16424, Indonesia
Lindawati Gani: Department of Accounting, Faculty of Economics and Business, Universitas Indonesia, Depok 16424, Indonesia
Elvia R. Shauki: Department of Accounting, Faculty of Economics and Business, Universitas Indonesia, Depok 16424, Indonesia
Lianny Leo: Department of Accounting, Faculty of Economics and Business, Universitas Indonesia, Depok 16424, Indonesia

IJFS, 2022, vol. 10, issue 3, 1-21

Abstract: This study aims to test cost stickiness behavior under different managerial ability levels. Managerial ability plays an important role in resource-related decision making. Previous cost stickiness research assumes that managers exhibit similar abilities to manage resources. However, managers with different managerial abilities may make different resource decisions, which leads to different cost stickiness levels. More able managers can manage resources efficiently and deal with resource shortages. This study also tests the effects of environmental uncertainty on cost stickiness under different managerial ability levels. Managers’ resource decisions must consider environmental uncertainty to generate optimal returns. More able managers are more willing to take risks and manage resources efficiently to deal with uncertainty. Meanwhile, less able managers tend to retain resources to cope with environmental uncertainty. We ran the panel regression analysis of 19,612 listed firm-year observations in ASEAN countries from 2013 to 2019. The results show that firms led by less able managers exhibit cost stickiness. Less able managers cannot manage resources efficiently and are more likely to retain resources than make costly adjustments. Further, the effect of environmental uncertainty on cost stickiness is stronger in firms led by less able managers. Less able managers tend to retain resources when sales decline.

Keywords: cost stickiness; managerial ability; environmental uncertainty; ASEAN (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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