Cost Stickiness of Private and Public Firms

This paper extends prior literature on cost behavior by providing evidence on whether and how external financing of equity affects the degree of SG&A cost stickiness. Based on a comprehensive dataset covering both public and private firms in Korea, we compare the degree of cost stickiness between public and private firms. We document that cost stickiness is in general greater in private firms than in public firms. Mediation analyses further reveal that differential financial constraints between private and public firms are mainly attributable to the difference in cost stickiness. Overall, our findings suggest that access to financing influences operations and hence cost structure of a firm.