State Ownership and Asymmetric Cost Behavior

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Ebrahimi Saeid; Faraji Omid; Arabzadeh Meysam; Ezadpur Mostafa; Mohammad Rezaii Fakhroddin

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Journal Paper

Paper Information

Journal: JOURNAL OF SECURITIES EXCHANGE Year:2022 | Volume:15 | Issue:57 Page(s): 495-530

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Title

State Ownership and Asymmetric Cost Behavior

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Keywords

State Ownership

Asymmetric Cost Behavior

Cost Stickiness

Abstract

Objective: In this study, the role of State Ownership in comparison to private ownership on the asymmetric behavior of costs has been investigated.Method: In order to conduct this research, sample of 325 companies listed in the Tehran Stock Exchange and Iran Fara Bourse (1990 firm-year) were selected during the period 2010-2020. Selling, general & administrative costs and, at a higher level, operating costs have been evaluated as dependent variables of the model. Hypotheses were tested using panel data and multiple regression model with ordinary least squares method and robust standard error approach.Results: State Ownership compared to private ownership leads to greater stickiness in selling, general & administrative costs and total operating costs.Conclusion: In the state-owned enterprises due to government support, prioritizing socio-political objectives and intervention in the decision-making process, the degree of cost stickness is higher, because downward adjustments in costs such as employee adjustments and changes in resources level is lower than other firms. Management expectations in conjuction with government support (such as optimism about future demand) and their incentives (such as opportunism and empire building) are other reasons for higher degree of cos stickness of state-owned enterprises in comparison with private-owned enterprises.

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