The Determinants and Economic Consequences of Cost Stickiness

Applications are invited for a self-funded, 3 year full-time or 6 year part-time PhD project.

The PhD will be based in the School of Accounting, Economics and Finance and will be supervised by Dr Awad Ibrahim and Dr Roza Sagitova.

Traditional cost models assume that the cost response to changes in demand/activity is equal. However, the literature provides a strong evidence after employing different models (Anderson et al.2003) that asserts that the cost response/changes to the same activity change is not equal as assumed by the traditional cost model. The accounting textbooks explain Activity-based Costing (ABC), Cost-Volume-Profit (CVP), etc, and propose that cost behavior is linear, i.e., equal response to the same activity change, to get valid results when applying these techniques (Ibrahim & Ezat, 2017; Ibrahim, 2018). However, the evidence provided by Anderson et al. (2003) proves that cost behavior is sticky (non-liner). They examined a sample of US firms and found that the behavior of SG&A is sticky where the costs increased by 0.55% per 1% increase in demand but decreased by only 0.35% per 1% decrease in demand. The literature explains that the resources-adjustment decisions taken by managers is a key in identifying the cost behavior. When the demand/activity increases, managers must adjust the resources upward to accommodate the increased demand while when demand/activity decreases, managers must adjust the resources downward to get rid of the slack resources (Ibrahim, 2018). However, managers found to respond differently affected by external factors such as economic growth and prospects, costs of retiring slack resources, and the scarcity of slack resources/assets such as skilled employees (Anderson et al. 2003; Chen et al.2012; Ibrahim et al. 2022), which makes the cost to behave as sticky or anti-sticky (non-linear), contrary to the traditional cost model assumption. Chen et al. (2012) examined the empire-building as incentive for managers for not adjusting the resources properly when demand/activity changes. However, we need to discover the determinants of this behavior and on the other side what would be the economic consequences of cost stickiness, which is less examined by literature. The potential findings would contribute in terms of better utilization of resources, making effective decisions of resources adjustment and minimizing the waste, which improves the sustainability and protect the environment. 

References and suggested articles

• Anderson, M., Banker, R., & Janakiraman, S. (2003). Are selling, general, and administrative costs ‘‘sticky”? Journal of Accounting Research, 41(1), 47–63.
• Chen, C., Lu, H., & Sougiannis, T. (2012). The agency problem, corporate governance, and the asymmetrical behaviour of selling, general, and administrative costs. Contemporary Accounting Research, 29(1), 252–282.
• Ibrahim, A., Hesham, A., and Aboelkheir, H. (2022). “Cost stickiness: A systematic literature review of 27 years of research and a future research agenda”. Journal of International Accounting, Auditing and Taxation 46, 100-439.  
• Ibrahim, A. (2015). Economic growth and cost stickiness: Evidence from Egypt. Journal of Financial Reporting and Accounting, 13(1), 119–140. 
• Ibrahim, A. (2018). Board characteristics and asymmetric cost behavior: Evidence from Egypt. Accounting Research Journal, 31(2), 301–322. 
• Ibrahim, A., & Ezat, A. (2017). Sticky cost behavior: Evidence from Egypt. Journal of Accounting in Emerging Economies, 7(1), 16–34. 
• Weiss, D. (2010). Cost behavior and analysts’ earnings forecasts. The Accounting Review, 85(4), 1441–1471

Fees and funding

Visit the research subject area page for fees and funding information for this project.

Funding availability: Self-funded PhD students only. 

PhD full-time and part-time courses are eligible for the UK Government Doctoral Loan (UK and EU students only – eligibility criteria apply).

Bench fees

Some PhD projects may include additional fees – known as bench fees – for equipment and other consumables, and these will be added to your standard tuition fee. Speak to the supervisory team during your interview about any additional fees you may have to pay. Please note, bench fees are not eligible for discounts and are non-refundable.

We’d encourage you to contact Dr. Awad Ibrahim (awad.ibrahim@port.ac.uk) and Dr. Roza Sagitova (roza.sagitova@port.ac.uk) to discuss your interest before you apply, quoting the project code.

Please also include a research proposal of 1,000 words outlining the main features of your proposed research design – including how it meets the stated objectives, the challenges this project may present, and how the work will build on or challenge existing research in the above field. 

When applying please quote project code:AE&F5001025