Impact of managerial optimism on cost stickiness: Evidence from China

초록

Managerial optimism affects top managers’ operational expenditures. We test the impact of the optimism on asymmetric cost behavior. We postulate that optimistic managers who overestimate the future growth of their firms tend to maintain an excessive level of unused slack resources with disincentives to downsize, thus inducing a higher level of cost stickiness. The results show that cost stickiness is greater in firms with optimistic managers rather than in those with rational peers. The robustness tests using alternative measure show a consistent result. Our findings imply that optimistic managers might induce a higher level of over-slack resulting from distorted cost decisions. © Serials Publications Pvt. Ltd.

키워드