Model Misspecification in the Sticky Cost Literature
School of Accountancy, University of Memphis, Fogelman College Admin Building, Memphis, USA
- *Corresponding Author:
- Coyne J
School of Accountancy
University of Memphis
221 Fogelman College Admin Building
Memphis, TN 38152, USA
Tel: (901) 678- 2467
E-mail: [email protected]
Received Date: April 23, 2016; Accepted Date: May 25, 2016; Published Date: May 30, 2016
Citation: Coyne J (2016) Model Misspecification in the Sticky Cost Literature. Int J Account Res 4:130. doi:10.4172/2472-114X.1000130
Copyright: © 2016 Coyne J. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
Beginning with Anderson et al., multiple studies have used a common model to investigate “sticky costs.” This model regresses the log change in SG&A on the log change in revenues. However, Balakrishnan et al. assert that the finding of sticky costs is the result of model misspecification, and using an alternative model that regresses the change in costs scaled by lagged revenues on the changes in revenues scaled by lagged revenues, they find no evidence of sticky costs. I assert that their model also suffers from misspecification, and I propose a new model for measuring sticky costs that addresses misspecification in both prior models. Using this model, I again find evidence of sticky costs.