Accounting department seminar: "Cost stickiness literature review" by Walaa Ghazy

A rapidly growing literature in accounting has investigated the asymmetric cost response to activity changes, or sticky costs.

Costs are sticky when they increase more rapidly when activity rises than they decrease when activity falls by an equivalent amount. This asymmetric cost response to activity changes is interpreted as evidence of active cost management. The sticky cost literature focuses on understanding the theory and practice of the asymmetric cost behaviour by identifying settings in which managers are more or less likely to engage in active cost management and on studying the consequences of the implied managerial actions that underpin sticky cost behaviour.

In this paper, Walaa Ghazy provides a comprehensive review of recent findings and insights, with a particular emphasis on the empirical evidence in support of the theory of asymmetric cost behaviour, the contrary claims about the validity of findings in the literature, the properties of sticky costs, the economic and behavioural determinants of sticky costs and the financial implications of this behaviour.

The presentation will be approximately 30 minutes followed by a question and answer session.