Journal of Korea Trade

Korea Trade Research Association (한국무역학회)
권호 표지
DOI QR코드

DOI QR Code

The Effects of Managerial Attributes on Cost Stickiness: An Empirical Analysis of Korean Exporters and Implications for Start-ups

  • Ji, Sang-Hyun (Division of Business and Commerce, Baekseok University) ;
  • Kwon, Il Sook (Department of Chinese Business and Economics, Hannam University) ;
  • An, Sang Bong (Department of Business Adminstration, Shingyeong University)
  • Received : 2020.12.08
  • Accepted : 2021.02.08
  • Published : 2021.04.30
Download PDF
⟨ Previous Next ⟩

Abstract

Purpose - We attempted to empirically verify the effects of managerial attributes on cost stickiness in exporters. Exporters are often affected not only by external factors such as exchange rate but also by internal factors such as managerial attributes regarding their business activities. Because cost stickiness is the product of a manager's decision-making, it has been considered that managerial attributes have a great influence on the behavior. Therefore, our study was intended to find out whether cost stickiness shows differentiated aspects depending on managerial attributes in exporters. Design/methodology - We considered two managerial attributes: CEO power and managerial overconfidence. First, CEO power was measured as CEO pay slice. In addition, managerial overconfidence was measured based on three methodologies presented by previous studies. To measure cost stickiness, we used multiple methodologies presented by prior research. Findings - The results of our empirical analysis are as follows. First, in export firms, the greater CEO power is, the greater cost stickiness is. This result suggested that export managers with great influence little respond to temporary sales decrease promptly, little reduce related production costs flexibly in preparation for future sales recovery, but leave room to endure costs for idle resources. Second, the greater managerial overconfidence is, the greater cost stickiness is. This result indicated that export managers with great overconfidence on their decision-making often view the prospect for sales recovery positively; therefore, they little respond to temporary sales decrease immediately, little reduce related production costs flexibly for future sales recovery, but leave room to endure costs for idle resources. Third, export managers with great influence in their businesses and great overconfidence in their decision-making tend to show relatively great cost stickiness. The results proposed that the combination of the two factors functions to make cost stickiness greater. Originality/value - Our study is differentiated from extant studies in that we provided empirical evidence of the effects of managerial attributes on their business activities in exporters. Specifically, we verified the effects of managerial attributes on cost stickiness in Korean exporters. The results of our study are expected to contribute to providing useful information for exporters and start-ups.

Keywords

References

  1. Ahmed, A. S. and S. Duellman (2013), "Managerial Overconfidence and Accounting Conservatism", Journal of Accounting Research, 51(1), 1-30. https://doi.org/10.1111/j.1475-679X.2012.00467.x
  2. Anderson, M. C., R. D. Banker and S. N. Janakiraman (2003), "Are Selling, General, and Administrative Costs Sticky?", Journal of Accounting Research, 41, 47-63. https://doi.org/10.1111/1475-679X.00095
  3. An, Jung-In and Yu-Jin Kim (2018), "Is the Switch from CEO to non-director Officer Related to Chaebol and CEO Power? Based on Individual Executive Pay Disclosure", Korean Accounting Journal, 27(5), 167-193. https://doi.org/10.24056/kaj.2018.08.006
  4. An, Sang-Bong, Sang-Hyun Ji and Ki-Chang. Yoon (2019), "A CEO Pay Slice and the Reliability of Accounting Information on Service Industry", International Journal of Industrial Distribution and Business, 10(5), 77-86. https://doi.org/10.13106/ijidb.2019.vol10.no5.77.
  5. An, Tae-Sik, Seok-Young Lee and Hyung-Rok Jung (2004), "Asymmetrical Behavior of Manufacturing Costs", Korea Business Review, 33(3), 789-807.
  6. Baek, W. S. (2017), "The Settling-up Effect of Quarterly Earnings and Cost Stickiness", Korean Accounting Review, 42(1), 97-139. https://doi.org/10.24056/KAR.2016.11.003
  7. Bebchuk, L. A., K. J. Martijn and U. C. Peyer (2011), "The CEO pay slice", Journal of Financial Economics, 102(1), 199-221. https://doi.org/10.1016/j.jfineco.2011.05.006
  8. Ben David, I., J. Graham and C. Harvey (2012), "Managerial Miscalibration", Working Paper, Ohio State University and Duke University.
  9. Bouwman, C. H. S. (2014), "Managerial Optimism and Earnings Smoothing", Journal of Banking and Finance, 41, 283-303. https://doi.org/10.1016/j.jbankfin.2013.12.019
  10. Cha, Myung-Ki., Su-Sung Kim and Kook-Jae Hwang (2016), "Managerial Overconfidence and Corporate Tax Avoidance", Accounting Information Review, 34(4), 441-485.
  11. Chi, Sung-Kwon, Sung-Wook Shin and Won-Ju Choi (2009), "Study on the Firm Specific Factor Influencing the Cost Stickiness Behavior", Journal of Business Education, 23(4), 225-250.
  12. Choi, Hae-Rin, Kyung-Hee Park and Jin-Ho Byun (2020), "The Effect of Managerial Overconfidence on Dividend Policy", Korean Journal of Financial Management, 37(2), 169-192. https://doi.org/10.22510/KJOFM.2020.37.2.007
  13. Cooper, R. and R. S. Kaplan (1998), The Design of Cost Management Systems: Text, Cases, and Readings (2nd Ed.), Upper Saddle River, NJ:Prentice Hal.
  14. Deshmukh, S., A. M. Goel and K. M. Howe (2013), "CEO Overconfidence and Dividend Policy", Journal of Financial Intermediation, 22(3), 440-463. https://doi.org/10.1016/j.jfi.2013.02.003
  15. Fu, K. and Chan-Ho Lee (2018), "The Effect of Managerial Ability and Quality of Reporting Profit on Labor Investment Efficiency", Tax Accounting Research, 55, 53-76.
  16. Gao, Y. and Kil-Seok Han (2018), "The Influence of Managerial Overconfidence on Earnings Management", Korean Business Education Review, 33(3), 425-442. https://doi.org/10.23839/kabe.2018.33.3.425
  17. Gu, Z. and J. Wu (2003), "Earnings Skewness and Analyst for Forecast Bias", Journal of Accounting and Economics, 35, 5-29. https://doi.org/10.1016/S0165-4101(02)00095-2
  18. Han, Young-Hee (2019), "The Impact of Cash Holdings Level on Firm Value", Tax Accounting Research, 62, 93-115.
  19. Hayward, M. L. A. and D. C. Hambrick (1997), "Explaining the premiums paid for large acquisitions: Evidence of CEO hubris", Administrative Science Quarterly, 42(1), 103-127. https://doi.org/10.2307/2393810
  20. Heaton, J. (2002), "Managerial Optimism and Corporate Finance", Financial Management, 31, 33-45. https://doi.org/10.2307/3666221
  21. Hirshleifer, D., A. Low. and S. H. Teoh (2012), "Are Overconfident CEOs Better Innovators?", Journal of Finance, 67(4), 1457-1498. https://doi.org/10.1111/j.1540-6261.2012.01753.x
  22. Homburg, C. A. and J. Nasev (2008), "How Timely Are Earnings When Costs Are Sticky? Implication for Link between Conditional Conservatism and Cost Stickiness", Working paper, Univ. of Cologne.
  23. Hong, Yeung-Eun, Soo-Jin Kim and Jong-Kook Park (2020), "Does the Cost Stickiness Affect the Stock Price Crash?", Korean Journal of Management Accounting Research, 20(2), 1-26.
  24. Hribar, P. and H. Yang (2013), "CEO Overconfidence and Management Forecasting", Working paper, University of Iowa.
  25. Hwang, Gyu-Young and Eung-Gil Kim (2018), "CEO Overconfidence and Dividend Policy: Evidence from Korean Large Business Group (Chaebols)", Review of Financial Information Studies, 7(1), 61-90. https://doi.org/10.35214/rfis.7.1.201802.003
  26. Jang, Seung-Hyun and Tae-Young Baek (2009), "The Effect of Corporate Business Conditions on the Asymmetric Cost Behavior: Roles of Cost Management and Earnings Management", Korean Accounting Review, 34(4), 71-107.
  27. Jang, Seung-Ju, Eung-Gil Kim, Young-Kyu Lee and Hee-Chun Roh (2017), "A Study on The Impact of CEO Overconfidence on Tax Avoidance", Korean Journal of Taxation Research, 34(2), 41-76.
  28. Ji, Sang-Hyun (2020), "The Managerial Overconfidence and Book-Tax Difference Information", Korean International Accounting Review, 90, 189-216.
  29. Jung, Hyung-Rok and Tae-Sik An (2005), "A Study on Cost Structure Change of Korean Manufacturing Firms", Korean Journal of Management Accounting Research, 5(2), 59-80.
  30. Jung, Moon-Jong and Sung-Wook Lee (2009), "Capacity Adjustment Decisions and Asymmetric Cost Behavior", Korean Journal of Management Accounting Research, 9(1), 28-50.
  31. Jung, Sung-Hwan (2015), "Cost Stickiness and Discretionary Revenues", Korea Business Review, 44(4), 1183-1208. https://doi.org/10.17287/kmr.2015.44.4.1183
  32. Kang, Shin-Hee (2019), "The Effect of CEO's Overconfidence on Capitalized R&D Expenditures", Master's Thesis, Yonsei University.
  33. Kim, Byung-Mo (2016), "Managerial Opportunism, Overconfidence and Stock Price Crash Risk", Asian Review of Financial Research, 29(2), 193-233.
  34. Kim, Hui-Jung and Won Park (2019), "The Relationship between CEO's Overconfidence or Overinvestment Activities and Firm Value-The Role of Large Shareholder's Ratio", Korean International Accounting Review, 62, 117-140.
  35. Kim, Hyung-Kook (2018), "The Relationship of Aggressive Tax Avoid and Managerial Ability", Tax Accounting Research, 58, 163-181.
  36. Kim, Ji-Young and Sang-Hyun Ji (2018), "The CEO Pay Slice (CPS) and Transparency of Business Administration:Utilizing Book-Tax Difference Information", Tax Accounting Research, 58, 229-248.
  37. Kim, Na-Youn and Kook-Jae Hwang (2020), "Factors Affecting the Relationship between Managerial Overconfidence and Earnings Management: Focusing on Market Competition", Korean Journal of Management Accounting Research, 20(1), 1-29.
  38. Kim, Sae-Ro-Na and Hae-Young Ryu (2014), "Managerial Overconfidence and Cost Stickines", Korean Accounting Journal, 23(6), 309-345.
  39. Kim, Sang-Mi, Hee-Jung Shin and Su-In Kim (2018), "The Impact of Managerial Overconfidence on Audit Fees", Journal of Accounting, Tax, and Audit Review, 60(1), 67-95.
  40. Kim, Sang-Myung, Sung-Ook Park and Hee-Sun Chung (2019), "Overconfident CEOs and Corporate Tax Avoidance", Journal of Taxation and Accounting, 20(6), 35-61. https://doi.org/10.35850/kjta.20.6.02
  41. Kim, Seong-Gab, Jin-Soo Lee and Jeong-Gu Seo (2017), "A Study on Determinants of Manager Compensation", Tax Accounting Research, 53, 23-44.
  42. Kim, Sung-Hwan (2018), "The Effect of Managerial Overconfidence on the Analysts' Earnings Forecasts", Korean Journal of Management Accounting Research, 18(3), 27-50. https://doi.org/10.31507/kjmar.2018.12.18.3.27
  43. Kim, Sung-Hwan (2019), "The Effect of Managerial Overconfidence on the Accrual Persistence and Market Responses", Journal of Taxation and Accounting, 20(5), 29-48. https://doi.org/10.35850/KJTA.20.5.02
  44. Kim, Tae-Sung, Jin-Soo Lee, Do-Youn Kim and Hung-Kwon Shin (2015), "A Study on the Relation between Cost Stickiness and Bond Credit Ratings", Korean International Accounting Review, 63, 203-226.
  45. Kim, Young-Shik (2018), "The Effect of Corporate Governance on Managerial Centrality", Korean International Accounting Review, 77, 77-109.
  46. Kim, Yu-Jin and Jung-In An (2018), "A Study of Managerial Centrality and Credit Ratings" Korean Accounting Journal, 27(6), 95-120. https://doi.org/10.24056/KAJ.2018.10.004
  47. Kwak, Young-Min and Hyun-Jin Kim (2017), "Managerial Centrality and Firm Value", Korean Accounting Review, 42(1), 187-226. https://doi.org/10.24056/KAR.2016.12.005
  48. Lee, Da-Hye and Sang-Hyuk Byun (2020), "The Effects of Management Overconfidence on Analyst Forecasts :Brokerage Size and Analyst Competition", Korean Journal of Management Accounting Research, 20(1), 67-93. https://doi.org/10.31507/KJMAR.2020.4.20.1.67
  49. Lee, Hye-Mi and Chang-Mok Hong (2018), "Management Overconfidence and Stock Price Informativeness", Korea Business Review, 47(5), 1201-1230.
  50. Lee, Jin-Soo and Sang-Hee Oh (2020), "Cost Asymmetry and Control Structure according to Manager's Overconfidence Tendency", Tax Accounting Research, 65, 235-255.
  51. Lee, Kang-young and Sung-Man Yoon (2011), "Effects of CEO's Financial Expertise on Relationship between Fraud and BTD or Discretionary Accrual", Tax Accounting Research, 30, 41-68.
  52. Lee, Kyun-Bong (2018), "The Effect of Multiple Directorships of Outside Directors on Earnings Management", Tax Accounting Research, 57, 37-54. https://doi.org/10.35349/tar.2018..57.003
  53. Lee, Kyun-Bong and Ye-Rin Ryu (2019), "The Level of Corporate Social Responsibility and Book-Tax Difference", Tax Accounting Research, 62, 243-265.
  54. Lee, Mi-Young, Young-Eun Hong and Jong-Kook Park (2015), "The Signaling Effect of Cost Stickiness and Labor Union", Tax Accounting Research, 46, 1-18.
  55. Lee, Sang-Cheol and Suk-Yeon Kim (2015), "The Effect of Corporate Social Responsibility on Cost Behavior", Tax Accounting Research, 44, 209-226.
  56. Malmendier, U. and G. Tate (2005). "CEO Overconfidence and Corporate Investment", Journal of Finance, 60(2), 661-700.
  57. Malmendier, U. and G. Tate (2008), "Who makes acquisitions? CEO Overconfidence and the market's reaction", Journal of Financial Economics, 89, 20-43. https://doi.org/10.1016/j.jfineco.2007.07.002
  58. Moon, Bo-Young and Hong-Min Chun (2018), "Managerial Centrality and Implied Cost of Equity Capital: Evidence from Korea", Accounting Information Review, 36(2), 109-133. https://doi.org/10.29189/kaiaair.36.2.5
  59. Moon, Ho-Eun and Cheol-Kyu Hong (2010), "A Comprehensive Analysis of Asymmetric Cost Behaviour and Its Inter-industry Differences", Korean Journal of Management Accounting Research, 10(1), 1-38.
  60. Moon, Hye-Won, Chang-Youl Goh and Hoon Jung (2020), "R&D Cost Stickiness: Focused on Digital Firms", Accounting Information Review, 38(1), 27-45.
  61. Noh, Gil-Kwan (2019), "The Impacts of Earnings Management Types on Asymmetric Cost Behavior: A Comparative Study of Korean and Japanese Firms", Tax Accounting Research, 60, 67-89. https://doi.org/10.35349/tar.2019..60.004
  62. Park, Ae-Young (2014), "Management's Misappropriation and the Cost Stickiness in KOSDAQ", Korean Journal of Management Accounting Research, 14(1), 1-32.
  63. Park, Ae-Young. and Ji-Young Kwak (2014), "The Level and Change Effect of Corporate Governance on Cost Stickiness", Korean International Accounting Review, 58, 81-102. https://doi.org/10.21073/kiar.2014..58.005
  64. Park, Jeong-Hwan (2019), "The Relationship Between Representative Director with Multiple Directorships and Firm Value", Tax Accounting Research, 60, 47-66. https://doi.org/10.35349/tar.2019..60.003
  65. Park, Jeong-Hwan and Ye-Rin Ryu (2018), "The Impact of Investment Tendency of Foreign Investor on the Audit Quality", Tax Accounting Research, 57, 165-184.
  66. Park, Jong-Il and Su-In Kim (2020), "The Effect of Managerial Overconfidence on the Relation between Financial Constraints and Tax Avoidance", Journal of Taxation and Accounting, 21(2), 157-204. https://doi.org/10.35850/KJTA.21.2.06
  67. Park, Ju-Cheul (2019), "The Comparison of Factors Affecting Going-Concern Audit Opinion between Big4 and Non Big4 Auditors", Tax Accounting Research, 61, 1-17.
  68. Park, Yeon-Hee, Jung-Ho Koo and Su-Il Pae (2012), "The information effect of cost stickiness in Korea market", Korean Accounting Review, 37(4), 227-252.
  69. Ryu, Hae-Young and Sae-Ro-Na Kim (2015), "Managerial Overconfidence and Accounting Conservatism", Korean Accounting Review, 40(6), 41-80.
  70. Schrand, C. M. and S. L. Zechman (2012), "Executive overconfidence and the slippery slope to financial misreporting", Journal of Accounting and Economics, 53(1), 311-329. https://doi.org/10.1016/j.jacceco.2011.09.001
  71. Shin, Bo-Sun and Yong-Sang Woo (2020), "The Moderating Effect of Auditor Size, Audit Fees, and Audit Hours in the Relationship between CEO's Overconfidence and Auditor-Client Disagreement", Accounting Information Review, 38(2), 71-99. https://doi.org/10.29189/KAIAAIR.38.2.04
  72. Son, Jae-Seong, Yong-Kyu Lee and Jin-Ha Park (2019), "The Effect of the A Bank's Performance Evaluation and Reward on Branch Office Cost Stickiness", Korean Journal of Management Accounting Research, 19(2), 95-123. https://doi.org/10.31507/KJMAR.2019.8.19.2.95