Selling, General, and Administrative Cost Behavior of Family Firms

This paper investigates whether family ownership affects selling, general and administrative cost behavior. We find that family firms exhibit anti-sticky cost behavior, as opposed to non-family firms that demonstrate cost stickiness. This result is robust to alternative definitions of family firms. The results are also preserved for a subsample of firms that switched ownership status (i.e., from family owned to non-family owned and vice versa). Further inquiry reveals that anti-sticky cost behavior is focused in family firms with active family involvement, that is, where the family member serves as an officer or chairperson of the firm. Finally, we test the effect of other known determinants of asymmetric cost behavior and find that managers’ optimism mitigates anti-sticky cost behavior and that successive sales decrease does not affect this behavior.