A Survey on the Effect of Managerial Ability on Cost Stickiness Using DEA Approach

Cost stickiness is influenced by two theory of decision-makers decisions and theory of delays in cost moderation. Based on the theory of judicious decision makers, managers try to maintain resources at a time of declining sales to increase company profits in the long run, which is one of the reasons for cost stickiness. This study examines the effect of managerial ability on the cost stickiness.
Using panel data analysis, this paper examines the role of managerial ability on cost stickiness of Iranian firms. The sample is comprised of 113 companies listed in Tehran Stock Exchange (TSE) during the period of 1389-1394. Cost stickiness is evaluated using Anderson et al (2003) approach. Managerial ability is assessed using DEA approach, that implements three inputs including current costs, the average of Non-Current Assets during the year and number of employees as well as three outputs including gross sales, profit before tax and rate on return of company.
After controlling for firm-specific variables, the results indicate that a negative relationship between managerial ability and the degree of cost stickiness. In other words, the results show that the ability of managers reduces costs stickiness of companies listed in Tehran Stock Exchange.