CEO career horizon and asymmetric cost behavior: the moderating role of board characteristics

PurposeThe purpose of this paper is to examine the impact of CEO career horizon on asymmetric cost behavior while considering the moderating effects of board characteristics.Design/methodology/approachThe sample includes 213 nonfinancial firms listed in Bursa Malaysia throughout 2015–2021. To assess cost stickiness, the selling, general and administrative (SG&A) costs were used. To address concerns related to endogeneity, the propensity score matching (PSM) and the difference-in-difference (DID) were applied in this study.FindingsThe results that firms with late career-stage CEOs exhibit greater cost asymmetry than those with early career-stage CEOs suggesting that implicit incentives arising from career horizons drive our main finding. Furthermore, we find that for firms with greater board independence, higher women representation, and a separation of chairman and CEO roles, the effect of CEO career horizon on cost stickiness is less pronounced.Practical implicationsThe empirical results have useful policy implications. For investors, given that CEO age is an important determinant of a firm’s sticky cost behavior, they need to factor CEO age into their investing, hiring, compensating and monitoring mechanisms. The research findings also provide policy implications for regulators and policymakers to undertake the necessary measures to optimize corporate governance standards and attenuate management’s opportunistic behavior. Regulators and policymakers should consider board independence, female board representation and chairman/CEO separation as variables that could mitigate the opportunistic behavior of late- career-stage CEOs, resulting in less cost asymmetry.Originality/valueThis paper expands the existing research on cost behavior and provides a new theoretical basis for the underlying factors of cost stickiness. It deepens the understanding of CEO career horizons and companies’ cost behavior.