Linguistically Induced Time Perception and Asymmetric Cost Behavior

Wei Huang () and Jaehyeon Kim ()
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Wei Huang: University of Hawaii at Manoa
Jaehyeon Kim: Ajou University

Management International Review, 2020, vol. 60, issue 5, No 4, 755-785

Abstract: Abstract Cost asymmetry indicates that costs decrease to a lesser extent when sales decline than costs increase when sales rise by the same magnitude. This asymmetric sensitivity of costs to activity changes is denoted as “cost stickiness” (Anderson et al. in J Account Res 41:47–63, 2003). Prior studies on cost analysis identify resource adjustment costs and managerial discretion as fundamental drivers of asymmetric cost behavior. This study examines whether linguistically induced time perception arising from future time reference in languages relates to the asymmetric sensitivity of costs to activity changes. We find that asymmetric cost behavior is more pronounced for firms located in countries whose languages do not require future events to be grammatically marked. Our evidence suggests that time encoding in languages influences speakers’ cognition, their resource adjustment decisions, and the cost behavior of firms they manage.

Keywords: Languages; Time reference; Cost behavior; Cost stickiness; Informal institutions (search for similar items in EconPapers)
JEL-codes: D24 L23 M40 Z10 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s11575-020-00429-4

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