Investigation of the Moderating Role of Agency Problem, Product Market Competition and Customer Concentration in the Effect of Trade Credit on Cost Stickiness

Document Type : Research Paper

Authors

1 Assistant Prof., Department of Accounting, Management and Accounting Faculty, Allameh Tabataba'i University, Tehran, Iran.

2 MSc., Department of Accounting, Management and Accounting Faculty, Allameh Tabataba'i University, Tehran, Iran.

Abstract

Objective: This research seeks to investigate whether credit trade can decrease cost stickness (as a signal of opportunistic behavior of manager) or not? and whether agency problem, product market competition and customer concentration can moderate the effect of trade credit on cost stickness or not?
Methods: Trade credit is measured by two ratios: accounts payable to cost of good sold ratio and accounts payable to sale ratio. Cost stickness is measures by selling, general and administrative expense stickness (SGA) and cost of goods sold stickness(CGS). The statistical population consists of the firms listed in Tehran Stock Exchange between 2014 to 2020.
Results: Credit trade affects negatively on cost stickiness and this effect is prevalent in the firms with more agency problems and active in less competitive market.
Conclusion: According to obtained findings, using credit trade leads to decrease the opportunistic behavior of managers and cost stickiness and so, it is a monitoring tool that can be used in evaluating performance and expense efficiency of firms. Additionally, in the firms suffer from more agency problems or active in less competitive market, trade credit decreases cost stickness more because suppliers monitor these firms more than others in order to maintain their interest.

Keywords

References

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Accounting and Auditing Review
Volume 29, Issue 3
2022
Pages 404-424

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