Investigation of the Moderating Role of Cost Stickiness on the Relationship between Change of Sale, General, and Administrative Costs and Product Market Competition

Valipour, Hashem; Sadeghzadeh Maharluie, Mohammad; Jokar, Mohammad

doi:10.22034/iaar.2020.112780

Investigation of the Moderating Role of Cost Stickiness on the Relationship between Change of Sale, General, and Administrative Costs and Product Market Competition

Document Type : Original Article

Authors

Hashem Valipour ¹

Mohammad Sadeghzadeh Maharluie ²

Mohammad Jokar ³

¹ Associate Professor of Accounting, Islamic Azad University, Marvdasht Branch, Iran

² Ph.D. Candidate in Accounting, Shiraz University, Iran

³ M.A. in Accounting, Shiraz University, Iran

10.22034/iaar.2020.112780

Abstract

There is not a consensus about the role of sale, general, and administrative costs on the wealth of shareholders. Some of the researchers believe the detrimental effect of these costs on the shareholders’ wealth while the others believe on the beneficial effect of these costs. Moreover, product market competition can have effective on this relationship. Current study is trying to find an answer to the questions of whether competition in market increase the company’s commitment to pay operational expenses or not? Whether abnormal increase in sale, general, and administrative costs causes better result of business operations which reflected in earnings per share. The statistical sample consist of 113 companies. The investigated period is from 2006 to 2016. The statistical results show that Lerner and adjusted Lerner have negative and significant effect on the sale, general, and administrative costs changes. Besides, stickiness has a moderating role only in the case of using Herfindahl-Hirschman as an index for competition. Also, the result of second hypothesis testing show a positive and significant relationship between abnormal spending of sale, general, and administrative costs and increase in market share. The moderating role of competition in increasing the market share was not significant only when Herfindahl-Hirschman used as an index for competition.

Keywords

Cost Stickness

Product Market Competition

Sale

General

and Administrative Costs