Institutional investors and cost stickiness: Theory and evidence

Chune Young Chung, Seok-Kyun Hur and Chang Liu

The North American Journal of Economics and Finance, 2019, vol. 47, issue C, 336-350

Abstract: Cost stickiness measures the degree of suboptimal cost reduction in response to a decline in a firm’s activity. This study examines the role of institutional monitoring in addressing the value-decreasing cost-stickiness problem exhibited in many firms. Using alternative proxies for institutional monitoring, we find that long-term institutional investors are associated with reductions in cost stickiness and that these reductions lead to superior future market and accounting performance. Our findings are robust to different model specifications and are independent of the effect of internal governance.

Keywords: Institutional monitoring; Cost stickiness; F-score; Corporate governance (search for similar items in EconPapers)
JEL-codes: G20 G32 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:47:y:2019:i:c:p:336-350

DOI: 10.1016/j.najef.2018.05.002

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