• The Journal of Industrial Distribution & Business
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• v.13 no.1
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• pp.11-21
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• 2022

Purpose: This study predicted cost asymmetry as a determinant of investment efficiency, and empirically analyzed the relationship between cost stickiness and investment efficiency. Research design, data and methodology: Using a sample of 4,382 Korean firm-year observations over 2011-2017 period, I examined the relationship between cost stickiness and investment efficiency. Asymmetrical cost behavior is measured as model of Homburg and Nasev (2008) and model of Park, Koo, and Pae (2012). Investment efficiency is measured as Chen, Hope, Li, and Wang (2011)'s model. Results: Firms with cost stickiness are less efficient in their investment than firms with non-cost stickiness. In other words, cost stickiness is an empirical result that supports the previous research on cost decision-making from perspective of managers pursuing private benefits due to information asymmetry. Conclusions: By showing that the manager's decision-making on the cost behavior affects the investment efficiency corresponding to capital management, the implications for the mechanism for efficient capital management are provided. Through the empirical results, it was shown that the cost stickiness is a product of opportunistic cost decision-making due to information asymmetry, and it is to present evidence that expands the meaning of the causes of asymmetric cost behavior.

• The Journal of the Korea Contents Association
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• v.19 no.5
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• pp.280-286
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• 2019

This study first examines whether the matching principle reduces information asymmetry and verifies the effect on earnings sustainability and information asymmetry. In the presence of information asymmetry between managers and information users, managers can reduce information asymmetry by increasing the quality of earnings. Information asymmetry is measured by the financial analysts' earnings forecast variance. When we look at the results of previous studies, verify whether information asymmetry decreases as the response to the revenue cost increases and whether negative relationship between profit persistence and information asymmetry appears when the response to the revenue cost is high. As a result, firms with high revenue cost response showed a decrease in information asymmetry. The persistence of the earningss from the high earnings-cost response shows that the analysts' earnings forecast dispersion decreases. This means that the better the response to the revenue cost, the better the quality of the earnings and the less the information risk about the uncertainty of the enterprise. This study is different from the previous studies in that it analyzed whether the persistence of the earnings that responded to the high revenue cost reduces the information asymmetry. The results of this study suggest that managers can reduce the information asymmetry by carrying out appropriate revenue - cost responses, which provides important implications for stakeholders who use accounting earnings information.

• Asia-Pacific Journal of Business
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• v.14 no.1
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• pp.351-364
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• 2023

Purpose - This study examines the effects of Dubai oil price and the volatility on the asymmetry of domestic gasoline price adjustment. Additionally, the study investigates the effects of "Altteul" gas-station and tax-cut policies on asymmetry. Design/methodology/approach - Firstly, the study calculates proxies for asymmetry and volatility of each window(every 3-month) by error-correction model and GARCH(1, 1) using daily domestic gas price and Dubai oil price from 2008/04/15 to 2022/12/31. Secondly, the study investigates the effects of the increasing rate of Dubai oil price, volatility, "Altteul" gas-station and tax-cut policies on asymmetry. The autoregressive distributed lag regression model is employed for estimations. Findings - The study finds that changes in the increasing rate of Dubai oil price and both types of volatility of Dubai oil price increase asymmetry. While "Altteul" gas-station and tax-cut policies decrease asymmetry. Additionally, the study fails to find that asymmetry in the Korean gasoline market in the estimation with total observations. Research implications or Originality - An increase in Dubai oil price volatility means an increase in cost uncertainty for gas-station owners. Since cost uncertainty is a kind of financial risk, the increase in volatility reinforces the asymmetry. The study provides supporting evidence for the idea.

• Journal of Distribution Science
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• v.18 no.11
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• pp.5-13
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• 2020

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.

• Journal of Convergence for Information Technology
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• v.10 no.11
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• pp.302-312
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• 2020

This study examined whether there is a difference in cost asymmetry between a corporate listed on KOSDAQ and a corporate listed on KOSPI, and whether there is a difference in cost asymmetry depending on the size of the listed corporate. In the previous study, cost asymmetry was examined only for listed corporate, but the difference in size between KOSDAQ-listed corporate and KOSPI-listed corporate was not examined. However, according to many studies, since the characteristics of corporate and firm risks are different between corporate listed on KOSPI and corporate listed on KOSDAQ, or even for listed corporate, such an impact may affect the decision-making of internal resource allocation. The analysis was conducted that there would be a difference in the impact. For this study, the results of analyzing the KOSPI and KOSDAQ markets from 2011 to 2019 using the cost behavior model of Anderson et al. (2003), There was a difference in cost behavior in the KOSPI and KOSDAQ markets. Overall, as in previous studies, Cost Stickiness was appeared. but in the case of the KOSPI market, Cost Stickiness was mitigated.It was found that corporate with large corporate size made the decision to dispose of idle resources more clearly when sales decreased. In addition, it was observed that the higher the foreign investor's ownership ratio, the KOSPI market, and the larger the corporate size, the more clearly the Stickiness of cost was mitigated. This study expands research on cost asymmetry and reveals that there is a difference between the KOSPI market and the KOSDAQ market, and between the size of the corporate, and has a differentiation from previous studies.

• Asia-Pacific Journal of Business
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• v.14 no.1
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• pp.231-246
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• 2023

Purpose - This study attempts to provide a new theoretical perspective on the quality signaling and its impact on a market under information asymmetry, focusing on how the accuracy and the cost of quality signaling affect sellers' and buyers' profit, suggesting appropriate designs of quality signaling methods which mitigates information asymmetry. Design/methodology/approach - In order to examine the effect of quality signaling on strategic interactions within the market, we establish an analytic model where market outcomes are determined by seller's quality claim and price, and buyers are risk-neutral. By investigating this analytic model through relevant game trees, we find the subgame perfect Nash equilibria of the market and predict related market outcomes based on sellers' quality signaling strategy. Findings - Our analytic model shows counterintuitive results that seller profit will be the lowest with inaccurate quality signaling and the highest with no quality signaling, mostly due to the certification cost. Consequently, sellers should proceed with caution if the quality signaling is less than accurate, as it may backfire. We believe that this is due to the fact that the inaccuracy of quality signaling causes some confusion and uncertainty in both sellers and buyers' decision to maximize profit, making it hard for sellers to predict buyers' behavior. Research implications or Originality - Although the sources and types of quality signaling errors have been investigated in the literature, there has not been satisfactory understanding regarding how inaccuracy of quality certification affects specific market outcomes. We expect that our theoretical model would provide important implications on how to utilize quality signaling to solve adverse selection issues in markets under information asymmetry.

• The Journal of Asian Finance, Economics and Business
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• v.7 no.7
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• pp.149-158
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• 2020

The purpose of this study was to investigate the impact of corporate governance index on the cost of equity in companies listed on the Tehran Stock Exchange. This study collects data from 975 observations during the period 2012 to 2018 to test the hypotheses using multiple linear regression model for the panel data. In this research, the independent variable of corporate governance index comprises of 27 specific corporate governance attributes. The results of hypothesis testing showed that corporate governance has a negative and significant effect on the rate of capital cost. In other words, the quality of corporate governance can lower the rate of capital cost. This result suggests that, by using a powerful corporate governance system and by declining the information asymmetry (increasing transparency) and agency conflict, we would be able to enhance the quality of financial reports. It would strengthen the capital market, attract financial suppliers and investors, and absorb the required financial resources of the firm by a lower rate. The findings of the study suggest that companies are able to reduce the cost of equity by establishing strong corporate governance. This conclusion suggests the importance and effectiveness of corporate governance in the cost of equity.

• Journal of Navigation and Port Research
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• v.48 no.3
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• pp.200-205
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• 2024

This paper examines the impact of ESG activities of domestic shipping companies on the cost of debt. It is known that companies with large information asymmetry tend to have high costs of debt. Corporate ESG activities have been identified as an effective means of reducing information asymmetry. By actively engaging in ESG activities, companies can lower the cost of debt by reducing information asymmetry. Therefore, this study aims to investigate whether these mechanisms, which have been observed in previous studies, also apply to domestic shipping companies. Multiple regression analysis is conducted on KOSP I-listed shipping companies from2010 to 2022. The cost of debt is set as the dependent variable, while the ESG rating is used as the explanatory variable. The analysis reveals that companies with a high level of ESG activities generally have a lower cost of debt. However, it is important to note that ESG activities of shipping companies do not seem to have a significant impact on their cost of debt. In fact, the level of ESG activities among domestic shipping companies is not particularly high (Hong, 2024). Despite these findings, domestic shipping companies should still strive for sustainable management to adapt to the rapidly changing business environment and meet the demands of the modern era. ESG management is a representative method for achieving sustainability. Therefore, shipping companies should not only focus on reducing the cost of debt but also on opening up the closed industry culture and communicating with capital market participants for sustainable growth. It is crucial for these companies to listen to the voices of stakeholders and embrace a holistic approach to sustainability.

• Journal of Digital Convergence
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• v.18 no.5
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• pp.145-155
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• 2020

The purpose of this study investigates the relationship between business strategy and cost behavior according to the corporate life cycle. To do so, I first examine the relationship between cost behavior and business strategy. And then, I analyze the effect of the business strategy on cost behavior conditional upon corporate life cycle based on listed Korean firms from 2000 to 2019. Specifically, the business strategy index is calculated by using the six continuous financial factors and the Prospector and Defender was defined on the score. Also, the corporate life cycle is distinguished based on the cash flow pattern. I find the evidence that the Prospector firms are likely to strengthen the asymmetry of cost behavior (cost stickiness), and examined that such a relationship was most strongly represented in the Introduction. This study is meaningful in that this is a more comprehensive analysis by examining business strategy and cost strategy according to the corporate life cycle and expand the application of financial information by using financial indicators to distinguish business strategies.

• Journal of Korea Trade
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• v.27 no.1
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• pp.1-18
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• 2023

Purpose - Using a sample of Korean multinational corporations, we examine whether the relationship between tax risk and the implied cost of capital discriminates between the environmental, social, and corporate governance (ESG) of highly rated firms. Design/methodology - Firms with high tax risks have an increased uncertainty of future cash flows. Therefore, as the volatility of future cash flow increases, information asymmetry and the required return increases. Highly rated ESG firms can reduce information asymmetry, thereby weakening the positive relationship between tax risk and cost of capital. We employ the standard deviation of the cash effective tax rate as proxy of tax risk. We utilize the ESG rating data of the Korea Corporate Governance Service (KCGS). We use a PEG model, MPEG model, and GM model to measure the implied cost of capital. Findings - We find a positive association between the implied cost of capital and tax risk. The positive relationship between tax risk and the implied cost of capital weakens in highly rated ESG firms. Highly rated ESG firms prefer a stable tax position to invest after-tax cash flows into sustainable management. Therefore, the negative effects of tax risk on cost of capital can be reduced. Originality/value - This study provides empirical evidence that ESG activities can mitigate the negative impact of tax risk on the cost of capital for Korean multinational corporations. In a business environment where ESG activities are more important, the empirical results that ESG activities can reduce the corporate risk of Korean FDI companies are expected to provide implications for the ESG activities of multinational corporations.