Study of the Effect of Manager's Personal Incentives and Corporate Governance Variables on Costs Stickiness in Companies Listed in Tehran Stock Exchange

The recent studies demonstrate that the costs have asymmetrical behavior which means the rate of reduction in costs while reducing the sales is less than the rate of increase in costs while increasing the sales at the same rate. This Asymmetrical behavior is called cost stickiness. One of the reasons that can exert an influence over cost stickiness is personal motives of managers that stem from the agency problem. Furthermore، the mechanisms of corporate governance result in inhibition of managers’ motives and result in decrease in the cost stickiness. Therefore in this study، the influence of managers’ empire building incentives and the variables of corporate governance on cost stickiness has been carried out. In this paper، the number of 142 firms were selected in the period of the years 2004 to 2013 as a statistical sample. The results suggest a significant impact of free cash flows on the costs stickiness. Hence، the asymmetry of costs have positively related with personal motivations and empire building of managers. Also، The findings of this study indicate that strong corporate governance mitigates the significant impact of free cash flow on the costs stickiness. This result suggest that corporate governance mechanisms play an important role in restrain managers’ incentives.