The validity of the cost stickiness theory in SMEs and the decision-making styles of managers : evidence from Turkey

Abstract

PURPOSE: Cost behaviour is the response of costs to changes in the volume of activity of businesses. In the literature, cost behaviour is discussed in two ways: symmetrical and asymmetrical. Firstly, this study aims to analyze the data on sales revenue and cost items related to sales of Small and Medium-Sized Enterprises (SMEs) with the help of the ABJ model in terms of cost stickiness. Another aim of the study is to determine the decision-making styles of the managers who make investment decisions in these enterprises. Thus, cost stickiness can be interpreted in terms of the manager’s decisionmaking style in the companies that make up the sample.

METHODOLOGY: A balanced panel data analysis method was used to test the cost stickiness levels in the study. The decision-making styles scale was used to determine the decision-making styles of the managers.

FINDINGS: The study concluded that the cost stickiness theory was valid for all variables in a one-year period, while the stickiness level of only general management expenses decreased in a two-year period. In addition, it has been determined that the managers of the enterprises adopt the rational decision-making style

ORIGINALITY/VALUE: To measure the cost stickiness level of a business, various cost and revenue figures that occur in that business over long periods are needed. Companies do not want to share this data with third parties or institutions for various reasons. For this reason, studies on cost stickiness have been carried out on largescale enterprises that have to offer their financial statements to the public. The originality of this study is that it tests the theory of cost stickiness for small and medium-sized enterprises. In addition, it is thought that the study is important in terms of considering cost stickiness together with the decision-making style of the manager.