Rigidity of selling, general, and administrative costs and managerial incentives to meet earnings thresholds: Evidence from conglomerates
Bibliographic record
Abstract
Does the conventional wisdom of decreasing marginal cost in economics hold in the real world? Surprisingly, previous accounting literature has found opposite evidence and documented cost stickiness. This paper examines the effect of managerial incentives to avoid loss and earnings decrease on rigidity of selling, general, and administrative (SG&A) costs for conglomerates and parent companies, and the resultant implication for parent company¡¯s cost management decisions. The results show that the estimates of cost rigidity are negatively significant in the absence of managerial incentives to meet earnings thresholds for both parent company and conglomerate. In the presence of such managerial incentives for both parties, the estimates are significantly positive and indicate disappearance of cost rigidity. The results hold after controlling for asset intensity, employee intensity, ROA, and GDP growth. Additionally, parent company cuts its cost more aggressively to avoid either party¡¯s loss, but cuts conglomerate¡¯s cost more aggressively to avoid either party¡¯s decrease in earnings. This suggests that parent company is more concerned about its performance in cost management than for the conglomerate¡¯s. Overall, the evidence suggests that the decreasing marginal cost concept is conditional on managerial incentives to meet earnings thresholds and that parent company makes selective SG&A cost reduction decisions to meet earnings thresholds.
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How this classification was reachedexpand
Full frame machine prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. The Gemma side is a direct model label for every work in the frame, read from the title-only record. The Codex side is a classifier learned from the 10,348 direct Codex labels and calibrated to design-weighted sample rates; fields without enough sample support carry no Codex call. Candidate is the union of the two sides; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels.
Distilled classifier scores by category (both heads)
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.003 | 0.016 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.000 | 0.001 |
| Bibliometrics | 0.001 | 0.002 |
| Science and technology studies | 0.001 | 0.001 |
| Scholarly communication | 0.002 | 0.002 |
| Open science | 0.001 | 0.002 |
| Research integrity | 0.001 | 0.001 |
| Insufficient payload (model declined to judge) | 0.004 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one source (direct Gemma or distilled Codex), not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".