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Cost Stickiness in Brazilian Firms

  • Otavio Ribeiro De Medeiros

    (Universidade de Brasilia, Brazil)

  • Patricia de Souza Costa

    (Universidade de Brasilia, Brazil)

Conventional cost accounting assumes that the relation between cost and volume is symmetric for volume increases and decreases. We test an alternative model where costs increase more when activity rises than they decrease when activity falls by an equivalent amount. We find, for a sample of Brazilian firms that selling, general, and administrative costs increase 0.59% per 1% increase in sales but decrease only 0.32% per 1% decrease in sales. We test several hypotheses about the properties of sticky costs and how the stickiness of SG&A costs changes with firm circumstances and we confirm cost stickiness for Brazilian firms.

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File URL: http://econwpa.repec.org/eps/fin/papers/0412/0412021.pdf
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Paper provided by EconWPA in its series Finance with number 0412021.

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Length: 14 pages
Date of creation: 15 Dec 2004
Date of revision:
Handle: RePEc:wpa:wuwpfi:0412021
Note: Type of Document - pdf; pages: 14
Contact details of provider: Web page: http://econwpa.repec.org

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