Attainment Discrepancy Level, Firm Resources Slack, and Sticky Cost

Abstract

The aim of this study is to further develop the behavioral theory of the firm into the context of sticky cost research. The company’s actions in managing resources can be explained through the concept of attainment discrepancy level and resource slack in the behavioral theory of the firm explaining the company’s sticky costs. This study also examines the effect of attainment discrepancy levels, both historical and social, on cost behavior between slack dimensions and overall slack. To examine it, this study used 2,416 observations data from 302 companies listed on the Indonesian Stock Exchange during 2009-2017. Using Eviews 10, the estimation results of the regression model based on HAC find that the attainment of discrepancy level and resource slack affects sticky costs. Specifically, this study found that historical attainment discrepancy level causes sticky cost behavior to decrease, whereas social attainment discrepancy level increases cost behavior to become more sticky cost. The effect of resource slack on sticky cost behavior is reduced, both for each slack dimension and for the overall slack. Furthermore, the results show that the existence of certain types of slack, namely unabsorbed slack, increases the company’s sticky cost behavior when it is associated with historical attainment discrepancy levels. To sum up, these results indicate that the firm makes internal business processes as the focus of attention in managing the company’s resources. As a consequence, this situation can be used as an alternative explanation for the company’s asymmetric cost behavior.