A Study on Asymmetrical Cost Behavior of Distribution Industry: Evidence from Korea

• Published in: Journal of distribution science Vol. 18; no. 11; pp. 5 - 13
• Main Authors: CHA, Sang-Kwon, CHOI, Yun-Yee
• Format: Journal Article
• Language: Korean
• Published: 30.11.2020
• Subjects: Distribution Industry; Cost Stickiness; Cost Asymmetry; Managers' Internal Resource Decision; Cost Behavior
• ISSN: 1738-3110; 2093-7717

Purpose: This research investigates the cost behavior of the distribution industry. Specifically, we investigate if the ratio of the increase in costs with an increase in sales is consistent with the ratio of the decrease in costs when sales decrease. Traditionally, cost is assumed to be symmetrical. In the case of the distribution industry, it was expected that the downward rigidity of the cost would be shown because it would be very difficult to decide to adjust resources when sales temporarily decrease. Therefore, studies have looked at Korean capital markets based on manufacturing and steel industries. However, no research has been done on the distribution industry. Research design, data, and methodology: To verify the hypothesis of this study, the asymmetry of cost was measured by Anderson et al. (2003). The sample used 28,695 firm-year data from 2002 to 2019 for the KOSPI and KOSDAQ stock markets. Results: The empirical analysis results are as follows. First, asymmetry of cost was observed in the case of the distribution industry. We confirm cost rigidity when sales decreased. Conclusions. This is the first study to look at cost behavior in the distribution industry, and the downward rigidity of cost in the distribution industry is observed.