CORPORATE GOVERNANCE AND DETERMINANTS OF COST ASYMMETRIC BEHAVIOR: EVIDENCE FROM PAKISTAN

Abstract

This study is an attempt to furnish fresh empirical evidence on the influence of corporate governance and determinants on asymmetric cost behavior. It relies on three multiple regression models through panel data fixed model to examine the behavior of operational cost (OC) and the influence of corporate governance and other determinants variables by running panel data random effect model based on a sample of 86 listed companies during 2014-2018. The findings of the study reveal that OC increases by rupees 0.23, but decreases by rupees 1.25 for an equivalent activity change of 1 rupees. It shows anti-sticky behavior that refutes the classic cost model notion that costs act in a linear fashion. Moreover, findings suggest that firm-year observations with average number of members in committee (ANMC) and overlapped members in remuneration and audit committee (OMC) exhibit cost asymmetry (stickiness). Besides, greater economic growth and institutional ownership show that greater operational cost stickiness.