Journal of East Asia Management

Institute of Management Research, Pusan National University (부산대학교 경영연구원)
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The Relationship Between Firm's Managerial Strategic Deviance and Cost Adjustment: Evidence from Korea

  • Kwon, Hyeok-Gi (Department of Business & Administration, Dong-Eui University) ;
  • Shin, Heejeong (Department of Business & Administration, Dong-Eui University)
  • Received : 2023.01.05
  • Accepted : 2023.01.19
  • Published : 2023.02.28
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Abstract

This study investigates the relationship between firm's cost behavior and the managerial strategic deviation. Firms which intend to reduce uncertainty and improve viability for future performance tend to implement managerial strategies similar to peer firms in the same industry. Since the managerial decisions affect firm's cost behavior, the strategic deviation including operations different from others would be associated with cost behavior distinct from peer firms. On firms listed on Korean Security Exchange and KOSDAQ markets from 2002 to 2017, the analysis show the results that the firm's strategic deviation is positively associated with cost-downward rigidity, indicating that the management strategy affects the cost behavior. Also, it means that corporate managers who choose a strategy that deviates from peer firms are less likely to adjust their resource even when sales decrease. This study is meaningful in expanding the literature on the determinants of cost behavior by analyzing the effect of the management strategy's characteristics of strategic deviation on cost behavior.

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References

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