The Effect of the Corporate Governance on Costs Asymmetric in Tehran Stock Exchange

Prior studies have documented the asymmetrical behavior of selling، general and administrative (SG&A) costs (i. e.، SG&A costs increase more when activity rises than they decrease when activity falls)، and have explained this phenomenon with economic factors. In this study، we focus on agency theory and argue that SG&A cost asymmetry is driven not only by economic factors but also by managerial empire-building incentives. Our sample is consists of 100 companies listed in Tehran stock Exchange in the period of time 2002 to 2012. There is a negative association between the strength of corporate governance and the degree of cost asymmetry. Our findings suggest that the empire building problem provides an additional explanation for SG&A cost asymmetry، and that corporate governance reduces cost asymmetry by preventing empire-building managers from over-spending on SG&A costs.