Publication Type

Journal Article

Publication Date

10-2011

Abstract

Selling, general, and administrative (SG&A) costs represent a significant proportion of thecosts of business operations. On average, the SG&A costs to total assets ratio is 27 percent,compared to the research and development (R&D) to total assets ratio of 3 percent(Banker, Huang, and Natarajan 2011). Due to the importance of SG&A costs, practitionerspay close attention to controlling SG&A spending. Understanding SG&A cost behaviorand the role of managers in adjusting the costs is thus important to researchers andpractitioners. Recent empirical research indicates that SG&A costs behave asymmetrically,that is, they increase more rapidly when demand increases than they decline when demanddecreases (Anderson, Banker, and Janakiraman 2003). This phenomenon (also labeled‘‘cost stickiness’’) has received much attention in the accounting literature (e.g., Balakrishnanand Gruca 2008; Anderson and Lanen 2007; Balakrishnan and Soderstrom 2009;Banker, Byzalov, and Plehn-Dujowich 2010).

Keywords

SG&A Cost behavior, cost asymmetry, cost stickiness, agency problem, empire building, downsizing, corporate governance

Discipline

Business and Corporate Communications | Corporate Finance

Research Areas

Corporate Governance, Auditing and Risk Management

Publication

Contemporary Accounting Research

Volume

29

Issue

1

First Page

252

Last Page

282

ISSN

0823-9150

Identifier

10.1111/j.1911-3846.2011.01094.x

Publisher

Canadian Academic Accounting Association

Additional URL

http://doi.org./10.1111/j.1911-3846.2011.01094.x

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