The Effect of Managers' Delta and Vega on Asymmetric Cost Behavior of Companies Listed in The Tehran Stock Exchange

Document Type : Original Article

Authors

• sana forsat ¹
• ali ashtab ²
• parviz piri ²

¹ Department of Accounting, Faculty of Economics and Management, Urmia university

² Department of accounting, Faculty of Economics and Management, Urmia university

10.22067/ijaaf.2024.86392.1439

Abstract

The objective of this paper is to examine the effect of managers’ stock on changes in sales, general and administrative (SG&A) costs, which can determine whether SG&A costs are sticky or non-sticky. In this study, two criteria for managers’ incentives were used. The first one is managers’ wealth sensitivity to stock price changes (Delta) and the second one is managers’ wealth sensitivity to stock return (Vega). The first hypothesis of the study states that Delta is effective on cost stickiness while costs experience more significant increase in response to increased sales than decreased sales. On the contrary, the second hypothesis states that Vega has a direct effect on non-sticky costs; while costs experience less increase in response to increased sales than decreased ones. The statistical sample of this study is 138 companies from 2008 to 2023. To test the hypotheses, a panel regression model was used, which showed that Delta has a significant positive effect and Vega has a significant negative effect on cost stickiness.

Keywords

• Asymmetric cost behavior
• Delta and Vega
• Managers’ incentives
• Managerial stock

Main Subjects

• Accounting

---