• The Journal of Asian Finance, Economics and Business
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• v.9 no.7
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• pp.185-196
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• 2022

The purpose of this study is to examine the effects of split ratings on earnings management through cost adjustments based on asymmetric cost behaviors. Using a sample of 2,027 Korean firm-year observations over the 2002-2019 period, we analyze whether a firm deliberately reduces discretionary costs, such as selling, general, and administrative (SG&A) expenses, to improve profits when it receives multiple ratings from credit rating agencies (CRAs). While examining earnings management incentives in the presence of split ratings, we also investigate the moderating effects of Chaebols, Korea's unique corporate governance structure. We find that split-rating firms show less stickiness in SG&A costs compared to non-split-rating firms when sales decrease. This result implies the deliberate reduction of discretionary costs to improve earnings in the presence of split ratings, which are more likely to change in future credit assessments. We also find that the incentives for earnings management of split-rating firms are limited in Chaebol firms, which have high levels of socio-economic surveillance and support affiliated firms through the internal market of corporate groups. This study contributes to existing research by identifying new determinants of cost behavior by using the framework of asymmetric cost behavior in relation to earnings management incentives.

• Asia-Pacific Journal of Business
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• v.11 no.1
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• pp.17-26
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• 2020

Purpose - This paper studies the welfare impacts of behavior-based price discrimination (BBPD) when firms are asymmetric in quality improvement costs. Design/methodology/approach - To this end, we consider a differentiated duopoly model with an inherited market share, where firms first make quality decisions and then compete in prices according to the pricing scheme, namely, uniform pricing or BBPD. Findings - We show that BBPD increases social welfare relative to uniform pricing if the firms' cost gap is large enough. This is because BBPD induces more consumers to buy a high-quality product than under uniform pricing, and because a low-cost firm's profit loss from BBPD decreases as the cost difference increases. Research implications or Originality - Our analysis offers policy implications for markets where BBPD raises antitrust concerns, and quality competition prevails.

• Journal of the Korea Convergence Society
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• v.11 no.1
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• pp.259-266
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• 2020

This study analyzes the effects of the obsolescence assets on the asymmetry of costs. Cost asymmetry refers to a lower percentage of costs when sales fall than increases in costs when sales increase. the obsolescence asset induces various decisions, including high maintenance costs and management improvements and replacement of facilities. This study is to analyze the cost behavior according to those decisions. The analysis showed that the higher the obsolescence of assets rate, we found cost elasticity, with a greater reduction in costs when sales decrease than the increase in costs when sales increase. Second, the lower the cost will not appear as the obsolescence of assets rate increases in case that the concentration of an item of property, plant and equipment is high, and when sales decrease. The above result means that the obsolescence of assets rate acts as operating risk and thus operates resources flexibly according to changes in sales, but when the concentration of property, plant and equipment is high, the decision-making constraint make it difficult for the flexible operation.

• Journal of Digital Convergence
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• v.17 no.12
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• pp.109-115
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• 2019

The purpose of this study is to analyze the effect of Prior Sales change on R&D Costs and each detail item, and to analyze what decision managers make when changing sales. In order to conduct a more in-depth analysis as well as a one-period model of Anderson et al. (2003), which was used in previous studies, the two-period model of Banker et al.(2014) And analyzed the detailed items. As a result of the analysis, it is possible to confirm cost stickiness behavior only in the depreciation cost and others due to the limit of the model in the one period model. For a more in-depth analysis, the analysis of two-period model showed that labor costs and other items showed cost stickiness behavior when prior sales increased, but total R&D costs showed a anti-cost stickiness behavior. When prior sales decline, consigned service costs showed a cost stickiness behavior. This study is meaningful because it analyzed the effect of prior sales change on R&D cost behavior which were not performed in previous studies. Furthermore, we expect to be able to conduct more detailed research by sales and industry in future studies.

• SUVANNABHUMI
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• v.11 no.1
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• pp.101-132
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• 2019

Why do some local rebel groups choose to form asymmetric alliances with large transnational terrorist organizations? This paper examines asymmetric terrorist alliance patterns by studying the international ties of domestic insurgencies in Southeast Asia. It uses data from Indonesia, Malaysia, the Philippines, and Thailand to construct a theory defining the determinants of the choice of alliance strategies by terrorist groups. The findings conclude that rebels with limited aims prefer to act alone out of fear of entrapment. They are cautious of becoming associated with the struggle of transnational radical groups and provoking organized response from international and regional counterterrorism authorities. Local groups are more likely to seek alliance with an established movement when they have ambitious final objectives, challenging the core interests of the target state. In this case, the benefits of training and logistic support provided by an experienced organization outweigh the costs of becoming a target for coordinated counterterrorist campaign.

• Journal of Digital Convergence
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• v.20 no.4
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• pp.215-224
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• 2022

This study tried to examine the effect of cost asymmetry on food service companies and what characteristics affect such cost behavior. This study analyses cost behavior for cost of good sold, selling, general and administrative cost over the 2019-2020 period. Also, the rate of change in activity level was measured using change in sales. This study measures the behavior of cost using the research model of [1]. As a result of the analysis, it was found that food service companies exhibited cost asymmetric behavior as their sales level decreased. In addition, the cost asymmetric behavior has been strengthened since the corona virus, and the shorter the operating cycle. Lastly, the shorter the inventory holding period and the collection period of accounts receivable, which are components of the operating cycle, more strengthen asymmetric behavior of costs. These results seem to be meaningful in examining the cost structure and factors that may affect the structure for food service industry. This has approached the cost aspect of the situation faced by service food companies due to COVID-19, and it can be suggested that this pandemic can lead to cost reduction due to a decrease in corporate sales.

• Journal of the Korea Academia-Industrial cooperation Society
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• v.20 no.10
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• pp.452-458
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• 2019

The purpose of this study is to analyze how managers' reporting choices affect asymmetric cost behaviors in manufacturing firms in Korea and Japan. In order to analyze the contents, SG&A, COGS, and operating expenses (OE), which were the targets of the previous studies, were analyzed using the operating costs paid in cash (OC) and the operating expenses before depreciation (OEBD) proposed by Shust and Weiss (2014). The differentiation of cost behavior was analyzed. The analysis revealed, first, that both Korea and Japan showed the difference between cost behavior of OE and OC. Specifically, the cost stickiness of OC was higher than that of OE. In particular, it showed that Korea firms have a higher intensity of tangible fixed assets that are weakening the cost stickiness compared to Japanese firms. Second, the occurrence of depreciation costs weakens the cost stickiness in both countries. Lastly, the higher the debt ratio, the more aggressively the cost reduction of Japanese companies. We hope that this study will help to improve the relationship between the two countries at the academic level when the Korea-Japan relationship cools down.

• Journal of Distribution Science
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• v.14 no.8
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• pp.51-57
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• 2016

Purpose - If control-ownership disparity is large, managers will not actively reduce costs; rather, they will maintain unutilized resources or possess surplus resources even when sales decrease with the purpose of increasing personal utility from status, power, compensation, and prestige. These managers' utility maximizing tendencies cause cost stickiness. We examine whether asymmetric behavior related to costs becomes stronger when there is a large disparity between ownership and control rights. Research design, data, and methodology - We construct a regression model to examine the relationship between control-ownership disparity and cost stickiness. STICKY, a dependent variable representing cost stickiness is a value found using the method of Weiss (2010), and Disparity is an interest variable that shows control-ownership disparity. Results - This study is based from the unique situations in Korea, in which high control-ownership disparity is common in firms. Large control-ownership disparity was found to increase cost stickiness of corporations. Conclusions - The results of this study imply that controlling shareholders may be regarded as a threat to the interests of minority shareholders and corporate values especially when controlling shareholders have significant influence over managers or the power to make managerial decisions as owners of a corporation.

• Journal of the Korea Academia-Industrial cooperation Society
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• v.19 no.9
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• pp.100-107
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• 2018

This study investigated the effect of corporate international diversification on cost stickiness. A cost behavior that indicates a lower rate of cost reduction when the volume of sales decreases than the rate of cost increase when the volume of sales is increased is called cost stickiness. This cost behavior is caused by decisions made by considering the adjusting costs of the manager, and for corporate international diversification, the decision making on the adjustment cost of the manager has been reduced by the offsetting accruals hypothesis. From the empirical results, we observed that the cost stickiness of international diversified companies decreases. It is expected to contribute to the capital market and academia by identifying whether corporate international diversification can have a significant impact on management decision making related to costs.

• Environmental and Resource Economics Review
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• v.24 no.3
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• pp.523-549
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• 2015

This paper investigates an oil refiner's asymmetric behavior in the adjustments of gasoline and diesel prices to changes in his own price and his rivals' prices as well as input costs. An asymmetric error correction model which allows a firm's pricing behavior to the deviation of other firms' prices from their long-run equilibrium level is employed for estimation using weekly data for the period April 2009 to January 2015. Evidence is found that there is a significant degree of asymmetry in the adjustment of wholesale prices to changes in crude oil price. A similar result in regard to the exchange rate is also found by the data. The estimation results for firm's response to changes in other firms' prices indicates that implicit collusion could be more easily exploited in the wholesale petroleum market as results of firms' interaction with each other and anticipation of rivals' pricing behavior. A few refiners show competitive price adjustment in response to the upward deviation of the others' prices from their equilibrium level.