2006 Volume 14 Issue 2 Pages 15-27
This paper investigates the cost behavior of selling, general, and administrative costs (SG & A) in Japanese firms. We confirm the basic results of Anderson et al. (2003) who investigated the cost behavior in U.S. firms. The results imply an asymmetric cost behavior-the magnitude of an increase in costs associated with an increase in activity is greater than the magnitude of a decrease in costs associated with an equivalent decrease in activity. However, we provide evidence that as compared to the U.S. firms, the Japanese firms require more time to adjust the SG & A costs to the desired level in response to a decline in demand. Furthermore, in order to investigate the reason for the asymmetric cost behavior, we examine whether the magnitude of the change in activity and current capacity utilization affect the cost behavior.
