Article (Scientific journals)
Improving predictions of upward cost adjustment and cost asymmetry at the firm-year level
Kaspereit, Thomas; Lopatta, Kerstin
2019In Journal of Management Accounting Research, 31 (3), p. 99-127
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Keywords :
Cost asymmetry; Analyst forecasts
Abstract :
[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.
Disciplines :
Accounting & auditing
Author, co-author :
Kaspereit, Thomas ;  University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA)
Lopatta, Kerstin
External co-authors :
no
Language :
English
Title :
Improving predictions of upward cost adjustment and cost asymmetry at the firm-year level
Publication date :
2019
Journal title :
Journal of Management Accounting Research
ISSN :
1558-8033
Publisher :
American Accounting Association, United States
Volume :
31
Issue :
3
Pages :
99-127
Peer reviewed :
Peer Reviewed verified by ORBi
Focus Area :
Entrepreneurship and Innovation / Audit
Available on ORBilu :
since 27 March 2019

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