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Evidence of sticky costs in banks of Argentina, Brazil and Canada

Author

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  • Marcela Porporato
  • Eliana Werbin

Abstract

An assumption made in traditional cost accounting books is that variable costs move proportionately with revenues. Recent studies on sticky costs challenged this assumption. This study shows that sticky costs were observed in banks of Argentina, Brazil and Canada in 2004-2009. Total costs are sticky because the magnitude of the increase associated with an increase in the volume of activity (Argentina 0.60%, Brazil 0.82% and Canada 0.94%) is larger than the magnitude of the fall associated with a decrease of the volume (Argentina 0.38%, Brazil 0.48% and Canada 0.55%, respectively). These results suggest that cost structure and macroeconomic climate might be valid explanations for cost behaviour. Banks with higher proportions of fixed costs show lower reductions of costs when demand declines. Banks that operate in an uncertain economic environment show the lowest change of costs levels when demand changes.

Suggested Citation

  • Marcela Porporato & Eliana Werbin, 2012. "Evidence of sticky costs in banks of Argentina, Brazil and Canada," International Journal of Financial Services Management, Inderscience Enterprises Ltd, vol. 5(4), pages 303-320.
    • Handle: RePEc:ids:ijfsmg:v:5:y:2012:i:4:p:303-320
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    Cited by:

    1. Cristiana Cattaneo & Gaia Bassani, 2020. "Sticky costs: le determinanti e le sfide per manager e accademici," MANAGEMENT CONTROL, FrancoAngeli Editore, vol. 2020(Suppl. 1), pages 103-126.
    2. Werbin Eliana & Marín Vinuesa Luz María & Porporato Marcela, 2012. "Costos pegajosos (sticky costs) en empresas españolas: un estudio empírico," Contaduría y Administración, Accounting and Management, vol. 57(2), pages 185-200, abril-jun.
    3. Cordova León, José Fernando & Duque Espinoza, Gabriela Monserrath & Argüello, Carolina Denisse Álvarez, 2018. "Comportamiento asimétrico de los costos en el sector de la construcción del Ecuador," Revista Tendencias, Universidad de Narino, vol. 19(2), pages 74-91, July.

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