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New publication “Does community social capital affect asymmetric cost behaviour?” in the journal Management Accounting Research

Thomas Loy jointly with Sven Hartlieb and Brigitte Eierle has published an article revolving around the question whether social capital influences cost management in the most highly regarded journal in the field of Management Accounting.

Thomas Loy (Professorship of Management Accounting & Information Systems), jointly with Sven Hartlieb und Brigitte Eierle of the University of Bamberg), has published an article revolving around the question whether social capital influences cost management in the most highly regarded journal in the field of Management Accounting. Social capital captures the strength of social norms and the density of social networks in a region. Results show that firms in U.S. counties with high social capital exhibit significantly less cost asymmetry, i.e. managers cut costs proportionally to sales decreases. Moreover, managers in high social capital counties refrain from value-destroying „empire building”. Hence, social capital is a substitute for classic corporate governance measures, such as increasing the size of corporate boards.

Abstract:

In this study, we examine the impact of community social capital on asymmetric cost behaviour. Community social capital captures the strength of social norms and the density of social networks in a region. As such, it is a socio-economic factor that might affect managerial resource adjustment decisions via different channels. We find that firms headquartered in U.S. counties with high social capital exhibit significantly less asymmetry in cost behaviour. Community social capital restrains managers from taking opportunistic resource adjustment decisions that would induce cost stickiness. This is in line with our additional finding, that cooperative norms acting in an ethical manner are the dominant channel for our setting, by which community social capital affects cost behaviour. Our results corroborate the important role of managerial discretion in cost behaviour and make a significant contribution in understanding how local environmental factors explain differences in firms’ sticky cost behaviour.

The paper can be downloaded free of charge until 2020-04-21 following this Link:

https://authors.elsevier.com/a/1afr-3jVUwQwl-