Abstract
Purpose: This research examines how the asymmetric cost behavior of companies affects the link between political connections with earnings variability and earnings response coefficient.
Method: The current research is of a descriptive-correlation type. To collect data, the information of 175 companies listed on the Tehran Stock Exchange was used during 2012 to 2022. For analysis, after examining the pre-tests of heterogeneity of variance, the Chow, Hausman, and Brosh-Pagan tests, with the help of multivariate regression model, the hypotheses have been tested.
Results: The results showed that political connections have a positive and significant effect on earnings variability and earnings response coefficient. Also, cost stickiness has a negative and significant effect on the relations between political connections and earnings variability, and cost stickiness has a negative and significant effect on the relations between political connections and earnings response coefficient.
Conclusion: With the increase of political connections, the earnings variability and the ERC increase, and due to the stickiness of costs, the decrease in sales has a negative effect on earnings more than the increase in sales. This weakens the relationship between political connections and the earnings response coefficient.
Contribution: The findings of this research have a new look at the complex relationships between political connections with earnings changes and earnings response coefficient with the moderating role of cost stickiness. The positive effect of political connections on the two variables of earnings variability and ERC, clarifies the important role that political connections can have on the firms' performance indicators.
Main Subjects
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