The Impact of Cost Stickiness on Firm Value: The Moderating Role of Free Cash Flow

تاثیر چسبندگی هزینه بر ارزش شرکت: با نقش تعدیل‌گری جریان‌های نقدی آزاد

Vahid Mennati, Hamideh Asnaashari and Mehran Mosafer
Additional contact information
Vahid Mennati: Assistant Professor, Department of Accounting, Faculty of Management and Accounting, Shahid Beheshti University, Tehran, Iran.
Hamideh Asnaashari: . Assistant Professor, Department of Accounting, Faculty of Management and Accounting, Shahid Beheshti University, Tehran, Iran
Mehran Mosafer: Ph.D. Student in Accounting, Shahid Beheshti University, Tehran, Iran.

Journal of Accounting Advances (JAA), 2026, vol. 17, issue 2, 473-501

Abstract: Cost stickiness refers to the asymmetric behavior of costs in response to changes in activity levels, such that costs do not vary linearly with changes in activity. According to the resource adjustment cost theory, cost stickiness occurs because managers tend to retain excess resources. This phenomenon reduces the level, persistence, and predictability of profitability, while increasing investment risk. Free cash flows further enhance managers’ ability to create and maintain excess resources. The purpose of this study is to examine the relationship between cost stickiness and firm value, considering the moderating role of free cash flows. This research is descriptive–correlational in nature. To achieve the research objective, theoretical foundations and prior studies were first reviewed using a library method. Then, using the audited financial statements of 129 firms listed on the Tehran Stock Exchange - selected through systematic screening - for the period 2013–2024 the study variables were measured, and the hypotheses were tested using the generalized least squares (GLS) regression method. The results indicate a significant negative relationship between cost stickiness and firm value. Moreover, high levels of free cash flows were found to strengthen this relationship. The findings of this study can assist managers in optimizing cost management and help investors to more accurately evaluate firm value and associated risks.

Keywords: Liquidity; Profitability; Capital Structure; Current Debt Solvency; Company Life Cycle (search for similar items in EconPapers)
JEL-codes: D24 G12 G32 M41 (search for similar items in EconPapers)
Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
https://jaa.shirazu.ac.ir/article_8377.html?lang=en

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:jaccad:023596

DOI: 10.22099/jaa.2025.51337.2454

Access Statistics for this article

Journal of Accounting Advances (JAA) is currently edited by Mohammad Namazi

More articles in Journal of Accounting Advances (JAA) from Shiraz University
Bibliographic data for series maintained by Amin Nazemi ().