Optimism and profit-based incentives in cost stickiness: an experimental study

Komang Ayu Krisnadewi and Noorlailie Soewarno ()
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Komang Ayu Krisnadewi: Universitas Airlangga
Noorlailie Soewarno: Universitas Airlangga

Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, 2021, vol. 32, issue 1, No 2, 7-31

Abstract: Abstract This study aims to examine whether managerial optimism and profit-based incentives affect cost behavior asymmetry, especially cost stickiness. Differ from previous literature on cost stickiness, the researchers use an experimental 2 × 2 between-within subjects factorial design. This design allows us to use data related to cost management specifically, not just in general term as in studies using archival data from public financial statements. Our study results reaffirm cost stickiness literature. This study focuses on experiments among accounting students who are not knowledgeable about cost behavior asymmetry. Even though our 71 student participants know only the symmetric cost behavior theory, when presented with a scenario related to sales prospects and information on profit-based incentives, the results of this study show otherwise. When participants are more optimistic and profit-based incentives have been achieved, the level of cost stickiness is also higher.

Keywords: Asymmetric cost behavior; Cost stickiness; Experiment; Optimism; Profit-based incentives (search for similar items in EconPapers)
JEL-codes: M40 M52 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s00187-020-00309-w

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