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The Effect of Strategy on the Asymmetric Cost Behavior of SG&A Expenses

Apostolos Ballas, Vasilios-Christos Naoum and Orestes Vlismas

European Accounting Review, 2022, vol. 31, issue 2, 409-447

Abstract: Asymmetric cost behavior has been attributed to deliberate managerial resource commitment decisions and a firm’s strategic choices is a significant determinant of these decisions. This study investigates the effect of strategy on the intensity and direction of the asymmetric cost behavior of selling, general, and administrative (SG&A) expenses. Employing a sample of US-listed firms for the period 1991–2014, we provide empirical evidence that a firm’s strategic orientation determines the direction and intensity of cost asymmetry. Firms classified as prospectors exhibit SG&A cost stickiness whereas firms classified as defenders exhibit SG&A cost anti-stickiness. Sensitivity and causality tests indicate that a firm’s strategic positioning and its portfolio of intangible re-sources independently affect the resource allocation decisions that are responsible for the direction of cost asymmetry for the SG&A expenses.

Date: 2022
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Citations: View citations in EconPapers (7)

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DOI: 10.1080/09638180.2020.1813601

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