The empirics of cost stickness in Philippine firms

• Main Author: Uy, Arnel Onesimo O.
• Format: text
• Language: English
• Published: Animo Repository 2011
• Subjects: Business enterprises > Philippines; Business
• Online Access: https://animorepository.dlsu.edu.ph/etd_doctoral/303; https://animorepository.dlsu.edu.ph/context/etd_doctoral/article/1302/viewcontent/CDTG004970_P.pdf
• Institution: De La Salle University

The challenges of our modern times require firms to be competitive for long-term survival. Competitive advantage is not only measured by the revenues (top-line) and profits (bottom-line) but also by how firms operate efficiently (costs). Recent studies on cost behavior find that costs behave asymmetrically with changes in activity levels. This sticky cost behavior challenges traditional cost model which assumes that cost behavior is symmetric for both activity increases and decreases. Using panel data analysis, we find that discretionary costs are sticky in response to changes in revenues among listed Philippine firms. However, we note that cost stickiness disappears when a more complete adjustment cycle is considered and when companies experience successive decline in activity level. Firm-specific and industry-specific characteristics also influence the degree of cost stickiness. Keywords: Cost stickiness, Cost behavior.