The dynamics of cost behavior: Unveiling sticky costs in private companies

Purpose: While research on cost stickiness has predominantly focused on large public companies, the variability in results has cast doubt on the generalizability of sticky cost behavior to all companies. This paper investigates whether cost sticki-ness is observable in smaller private companies – i.e., firms without publicly traded securities – thus addressing a notable gap in the literature. Design/methodology/approach: This study adopts the empirical framework of Anderson et al. (2003), using data from private Italian firms from 1998 to 2022. Furthermore, it extends the scope of analysis to include such diverse cost catego-ries as selling, general, and administrative (SG&A) costs, total labor cost, purchase costs, rent costs, and other operating expenses. Findings: The findings indicate that SG&A costs in private firms are significantly less sticky than those reported for large public firms. Cost stickiness is also ob-served in labor, rent, and other operating costs but not in purchase costs. Notably, cost stickiness varies across industries. Originality/value: This study sheds new light into the dynamics of cost stickiness by highlighting how asymmetrical cost behavior in small and medium-sized pri-vate companies differs from that in large public companies, enhancing the under-standing of cost management practices across business contexts.

Keywords: sticky costs, asymmetrical cost behavior, SG&A costs, private versus public companies, SMEs

Jel codes: M21, M41

Nicola Dalla Via, The dynamics of cost behavior: Unveiling sticky costs in private companies in "FINANCIAL REPORTING" 2/2024, pp 13-46, DOI: 10.3280/FR2024-002002