Abstract
Recent researches on cost behavior have revealed that costs do not change proportionately with changes in sales showing that costs increase in response to increase in sales, costs do not decline proportionately with decrease in sales. This asymmetric cost behavior is termed as “sticky costs”. One of the hypotheses on costs stickiness explains it as a result of deliberate decisions of managers. When managers facing decline in sales consider that sales temporally decrease and expect that sales increase in near future, they would deliberately retain the organizational resources. Because, in the long run, retaining orgnizational resources could result in lower costs than eliminating the organizational resources in response to the decline in sales and reacquiring the same in response to the increase in sales. This hypothesis, however, has not been examined in the previous researches. Information on the prospect of future sales has not been used in the previous works. In this paper, sales forecasts issued by managers will be used as a proxy for the prospect of future sales, as we examine the hypothesis that cost stickiness is the result of deliberate decision making by managers.
