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Cost behavior and profitability of family firms

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  • Abudy, Menachem (Meni)
  • Shust, Efrat

Abstract

This paper examines the impact of family ownership on firms’ asymmetric cost behavior and its implications for profitability. We find that family firms exhibit anti-sticky cost behavior, that is, they record a greater reduction in costs upon a sales decline than the increase in costs upon a similar sales upswing. In contrast, non-family firms demonstrate the prevalent pattern of cost stickiness. We posit that the greater cost reduction in family firms during downturns enhances the resilience of their profitability. Consistent with this notion, we find that family firms outperform non-family firms in periods of business contraction.

Suggested Citation

  • Abudy, Menachem (Meni) & Shust, Efrat, 2025. "Cost behavior and profitability of family firms," Finance Research Letters, Elsevier, vol. 85(PB).
    • Handle: RePEc:eee:finlet:v:85:y:2025:i:pb:s1544612325012644
    DOI: 10.1016/j.frl.2025.108006
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    Cited by:

    1. Mugerman, Yevgeny & Rooz (Stern), Ruth, 2025. "Exploring the impact of identity fusion on managerial decision-making in eponymous firms," Journal of Behavioral and Experimental Finance, Elsevier, vol. 47(C).
    2. Abudy, Menachem & Rooz, Ruth & Shust, Efrat, 2025. "Inventory holding strategy and the role of board expertise in family firms: just-in-case or just-in-time?," Finance Research Letters, Elsevier, vol. 86(PG).

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    More about this item

    Keywords

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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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