Reference : Improving predictions of upward cost adjustment and cost asymmetry at the firm-year level
Scientific journals : Article
Business & economic sciences : Accounting & auditing
Entrepreneurship and Innovation / Audit
http://hdl.handle.net/10993/39152
Improving predictions of upward cost adjustment and cost asymmetry at the firm-year level
English
Kaspereit, Thomas mailto [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA) >]
Lopatta, Kerstin mailto []
2019
Journal of Management Accounting Research
American Accounting Association
31
3
99-127
Yes (verified by ORBilu)
International
1049-2127
1558-8033
United States
[en] Cost asymmetry ; Analyst forecasts
[en] This study introduces a new method for predicting cost elasticity with respect to changes
in sales that incorporates cost asymmetry at the firm-year level. The new method is based on widely available factors that, according to the “economic theory of sticky costs” (Banker et al., 2013) and the “integrated theory of cost behavior” (Banker and Byzalov, 2014), are expected to influence cost behavior. The new method is subject to fewer data restrictions than the method proposed by Weiss (2010). By extending the cost variability and cost stickiness (CVCS) model of Banker and Chen (2006), we find that incorporating firm-year specific proxy measures for upward cost adjustment and cost asymmetry significantly enhances earnings forecasts. However, this improvement in forecast accuracy is not reflected in contemporaneous stock returns, pointing towards a partial understanding of cost behavior by capital markets. We further find that predicted cost stickiness is associated with lower analysts’ forecast accuracy and a weaker effect of earnings surprises on market reactions, confirming the results reported in Weiss(2010) for his measure of cost asymmetry.
http://hdl.handle.net/10993/39152
10.2308/jmar-52345

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