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All Journal JABM JOURNAL of ACCOUNTING - BUSINESS & MANAGEMENT
Luis Felipe Llanos Reynoso
Facultad de Economía y Negocios, Universidad Anáhuac México
Decision Sciences, Operations Research & Management Economics, Econometrics & Finance Other

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Sticky Costs and Expenses are not Alike: Mexican Reality Luis Felipe Llanos Reynoso; César Vela-Beltrán-del-Río; José Luis Martínez-Berrones
Journal of Accounting, Business and Management (JABM) Vol 28 No 1 (2021): April
Publisher : STIE Malangkucecwara

Show Abstract | Download Original | Original Source | Check in Google Scholar | DOI: 10.31966/jabminternational.v28i1.823

Abstract

The purpose of this paper is to further the discussion between the sticky costs and expenses effects. For this reason, it is important to highlight their differences; a cost represents an investment on an asset to be sold, while expenses are assets toconsume. Therefore, sticky costs and expenses must be measured and analyzed separately and differently. Business leaders must understand that costs and expenses will not mirror each other, nor will they mirror income changes. This is in addition to the stickiness effects that represent the management’s inability to effectively reduce the expenses, potentially endangering the firms’ financial health. Furthermore, stickiness rates are significantly more pronounced in income decrease years as compared to income increase years. This is especially risky for administrators during a financial crisis. It is important to note that correctly managing sticky costs and expenses is contingent on businesses remaining competitive. Our multivariable analysis, with a 17-year database, encompasses 60 issuers; it was used to analyze cost and expense stickiness within industrial and publicly traded corporations in Mexico. Understanding the coststickiness theory will enable corporations to adequately manage their operations
The Deceitfulness of Sticky Costs on Banking Systems César Vela-Beltrán-del-Río; Luis Felipe Llanos Reynoso
Journal of Accounting, Business and Management (JABM) Vol 25 No 2 (2018): October
Publisher : STIE Malangkucecwara

Show Abstract | Download Original | Original Source | Check in Google Scholar | Full PDF (346.545 KB) | DOI: 10.31966/jabminternational.v25i2.357

Abstract

Understanding the true, sometimes deceitful, nature of sticky costs is vital to take advantage of market opportunities and to compete; by aligning the needed substructure to the medium and long term business expectations. Doing so will allow management to be better positioned to achieve such goals. This long-term research (16 years), performed in Mexico, offers a holistic understanding of the real sticky costs behavior in both bullish and bearish markets. The stickiness nature of costs is an unintended manifestation of the embedded conditions of the assets cquired, while pursuing longer term objectives. This is the case because it is through assets, in general, that businesses compete. We will document that costs behave differently in bearish and bullish markets; costs, under general market conditions, perform at different rates in each market. We introduced a dummy regression variable to determine if the increase in administrative spending is positively related to an income increase, considering years with income increases and decreases. We also found that costs will continue rising, at a lower rate, even in bearish markets, unless there is a global crisis. Those who not understand the actual sticky nature of costs will face their deceitful nature, especially during bearish markets.
Co-Authors César Vela-Beltrán-del-Río José Luis Martínez-Berrones