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Do Earnings Targets and Managerial Incentives Affect Sticky Costs?

Journal of accounting research, 2013-03, Vol.51 (1), p.201-224 [Peer Reviewed Journal]

2013 The Accounting Research Center at the University of Chicago Booth School of Business ;Copyright ©, University of Chicago on behalf of the Accounting Research Center, 2012 ;ISSN: 0021-8456 ;EISSN: 1475-679X ;DOI: 10.1111/j.1475-679X.2012.00471.x ;CODEN: JACRBR

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Title:
Do Earnings Targets and Managerial Incentives Affect Sticky Costs?
Author: KAMA, ITAY ; WEISS, DAN
Subjects: Accounting procedures ; Accounting research ; Analytical forecasting ; Cost analysis ; Cost estimation models ; Cost incentives ; Cost of sales ; Earnings ; Economic costs ; Economic forecasts ; Economic incentives ; Financial accounting ; Financial analysis ; Financial management ; Incentives ; Managers ; Motivation ; Net income ; Resource management ; Revenue ; Sales management ; Studies
Is Part Of: Journal of accounting research, 2013-03, Vol.51 (1), p.201-224
Description: This study explores motivations underlying managers' resource adjustments. We focus on the impact of incentives to meet earnings targets on resource adjustments and the ensuing cost structures. We find that, when managers face incentives to avoid losses or earnings decreases, or to meet financial analysts' earnings forecasts, they expedite downward adjustment of slack resources for sales decreases. These deliberate decisions lessen the degree of cost stickiness rather than induce cost stickiness. The results suggest that efforts to understand determinants of firms' cost structures should be made in light of the managers' motivations, particularly agency-driven incentives underlying resource adjustment decisions.
Publisher: Malden, USA: Blackwell Publishing Inc
Language: English
Identifier: ISSN: 0021-8456
EISSN: 1475-679X
DOI: 10.1111/j.1475-679X.2012.00471.x
CODEN: JACRBR
Source: Alma/SFX Local Collection

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Do Earnings Targets and Managerial Incentives Affect Sticky Costs?

2013 The Accounting Research Center at the University of Chicago Booth School of Business ;Copyright ©, University of Chicago on behalf of the Accounting Research Center, 2012 ;ISSN: 0021-8456 ;EISSN: 1475-679X ;DOI: 10.1111/j.1475-679X.2012.00471.x ;CODEN: JACRBR

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