The Determinants and Economic Consequences of Cost Stickiness

Applications are invited for a self-funded, 3 year full-time or 6-year part-time PhD project.

The PhD will be based in the School of Accounting, Economics and Finance and will be supervised by Dr Awad Ibrahim and Dr Roza Sagitova.

The work on this project will:

•  Review the cost stickiness literature to find out the gaps in terms of determinants and consequences. 
•  Develop hypotheses, collect relevant secondary data and employ relevant models to find evidence of cost stickiness and identify the most common managerial drivers of cost stickiness.  
• Examine the potential economic consequences of cost stickiness and its potential impact on the effective utilization of resources. 
• Target a publication on the topic in top-ranked journals and present in conferences. 

Project description

Traditional cost models assume that the cost response to changes in demand/activity is equal. However, the literature provides a strong evidence after employing different models (Anderson et al.2003) that asserts that the cost response/changes to the same activity change is not equal as assumed by the traditional cost model. The accounting textbooks explain Activity-based Costing (ABC), Cost-Volume-Profit (CVP), etc, and propose that cost behavior is linear, i.e., equal response to the same activity change, to get valid results when applying these techniques (Ibrahim & Ezat, 2017; Ibrahim, 2018). However, the evidence provided by Anderson et al. (2003) proves that cost behavior is sticky (non-liner). They examined a sample of US firms and found that the behavior of SG&A is sticky where the costs increased by 0.55% per 1% increase in demand but decreased by only 0.35% per 1% decrease in demand. The literature explains that the resources-adjustment decisions taken by managers is a key in identifying the cost behavior. When the demand/activity increases, managers must adjust the resources upward to accommodate the increased demand while when demand/activity decreases, managers must adjust the resources downward to get rid of the slack resources (Ibrahim, 2018). However, managers found to respond differently affected by external factors such as economic growth and prospects, costs of retiring slack resources, and the scarcity of slack resources/assets such as skilled employees (Anderson et al. 2003; Chen et al.2012; Ibrahim et al. 2022), which makes the cost to behave as sticky or anti-sticky (non-linear), contrary to the traditional cost model assumption. Chen et al. (2012) examined the empire-building as incentive for managers for not adjusting the resources properly when demand/activity changes. However, we need to discover the determinants of this behavior and on the other side what would be the economic consequences of cost stickiness, which is less examined by literature. The potential findings would contribute in terms of better utilization of resources, making effective decisions of resources adjustment and minimizing the waste, which improves the sustainability and protect the environment. 

General admissions criteria

You'll need a good first degree from an internationally recognized university (minimum upper second class or equivalent, depending on your chosen course) or a Master’s degree in a related area. In exceptional cases, we may consider equivalent professional experience and/or qualifications. English language proficiency at a minimum of IELTS band 6.5 with no component score below 6.0.

How to Apply

We’d encourage you to contact Dr. Awad Ibrahim (awad.ibrahim@port.ac.uk) and Dr. Roza Sagitova (roza.sagitova@port.ac.uk) to discuss your interest before you apply, quoting the project code.

When you are ready to apply, you can use our online application form or click on “Apply” on  Accounting PhD subject area page and select the link for the relevant intake. Make sure you submit a personal statement, proof of your degrees and grades, details of two referees, proof of your English language proficiency and an up-to-date CV. Our ‘How to Apply’ page offers further guidance on the PhD application process. 

Please also include a research proposal of 1,000 words outlining the main features of your proposed research design – including how it meets the stated objectives, the challenges this project may present, and how the work will build on or challenge existing research in the above field. 

When applying please quote project code: AE&F5001025