Abstract

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. Asymmetrical behavior of costs can be studied from the management and shareholders perspective,from shareholders perspective, the behavior of costs is a manifestation of the management decisions and reflects the management’s incentive. Thus, Investors by analyzing of financial information will be able to investigating the effects of management decisions on firm performance. This study applied agency theory because cost stickiness may stem from empire building incentive. Thus, this study used agency costs as independent variables to explain sticky cost behavior and postulated that the company with higher agency costs has the higher degree of cost stickiness. In this paper, the numbers of 68 firms were selected in the period of the years 2004 to 2013 as a statistical sample. The results showed that behavior of cost in Tehran Stock Exchange is stickiness and agency costs are positively associated with the degree of cost stickiness.