TY - JOUR
T1 - Are costs really sticky? Evidence from publicly listed companies in the UAE
AU - Zanella, Fernando
AU - Oyelere, Peter
AU - Hossain, Shahadut
N1 - Publisher Copyright:
© 2015 Taylor & Francis.
PY - 2015/12/26
Y1 - 2015/12/26
N2 - This article measures the degree of adjustment between operating revenues and costs for publicly listed companies in the United Arab Emirates (UAE). Traditional cost models assume that variable costs change proportionally in response to an upward or downward fluctuation in demand. However, in recent years, such an assumption has been questioned by a variety of papers from the economics and accounting fields. Typically, cost stickiness is defined as costs decreasing by less than 1% when sales decrease by 1%, while reacting closer to the proportion of change when sales increase. This study, unlike the vast majority of the literature, did not find cost stickiness in the UAE after using panel data regression analysis. The main explanation is that UAE has mostly expatriate labour force that does not have the typical benefits of employment protection legislation (EPL) available in other national jurisdictions. EPL is a main reason that costs adjustments during decreasing sales is curbed due to the associated costs of firing employees.
AB - This article measures the degree of adjustment between operating revenues and costs for publicly listed companies in the United Arab Emirates (UAE). Traditional cost models assume that variable costs change proportionally in response to an upward or downward fluctuation in demand. However, in recent years, such an assumption has been questioned by a variety of papers from the economics and accounting fields. Typically, cost stickiness is defined as costs decreasing by less than 1% when sales decrease by 1%, while reacting closer to the proportion of change when sales increase. This study, unlike the vast majority of the literature, did not find cost stickiness in the UAE after using panel data regression analysis. The main explanation is that UAE has mostly expatriate labour force that does not have the typical benefits of employment protection legislation (EPL) available in other national jurisdictions. EPL is a main reason that costs adjustments during decreasing sales is curbed due to the associated costs of firing employees.
KW - United Arab Emirates
KW - cost stickiness
KW - employment protection legislation
KW - expatriates
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U2 - 10.1080/00036846.2015.1080807
DO - 10.1080/00036846.2015.1080807
M3 - Article
AN - SCOPUS:84945450820
SN - 0003-6846
VL - 47
SP - 6519
EP - 6528
JO - Applied Economics
JF - Applied Economics
IS - 60
ER -