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Managerial risk appetite and asymmetry cost behavior: evidence from China

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  • Ziyang Li
  • Qianwei Ying
  • Yuying Chen
  • Xuehui Zhang

Abstract

Managerial risk preferences have considerable impacts on a firm’s cost management through committed resource adjustment decisions. We investigate whether a firm’s cost behaviour is influenced by managers’ risk appetite and find that cost stickiness increases with managers’ risk‐seeking. The positive relationship between risk‐seeking and cost stickiness is weaker for firms with higher levels of manager capacity. We further find that the moderating effect of managerial capacity is more pronounced in non‐state‐owned enterprises, in less competitive industries, and in areas with lower degrees of marketisation. These results suggest that managers’ personal characteristics are key factors that affect sticky cost behaviour.

Suggested Citation

  • Ziyang Li & Qianwei Ying & Yuying Chen & Xuehui Zhang, 2020. "Managerial risk appetite and asymmetry cost behavior: evidence from China," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(5), pages 4651-4692, December.
    • Handle: RePEc:bla:acctfi:v:60:y:2020:i:5:p:4651-4692
    DOI: 10.1111/acfi.12692
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