Earnings management research often uses discretionary accruals from Jones-type models. These models assume a linear relation between sales changes and accruals. However, we predict and find that sales changes have a non-linear asymmetric effect on accruals through managers' operating decisions....

We examine the relation between demand uncertainty and firms' production outsourcing decisions. Contrary to the traditional view on make-or-buy decisions in management accounting textbooks, we predict that demand uncertainty deters outsourcing by a manufacturer from a supplier. Building on...

Sales decreases affect earnings more than sales increases because of cost stickiness. We hypothesize that this correlated omitted variable constitutes a confounding effect in standard asymmetric timeliness models. Adding sales change direction to the Basu (1997) and Ball et al. (2013b) models...

Accountants examine multiple indicators when assessing whether individual assets are impaired. Different indicators predict cash flows over varying time horizons, and their importance varies with how far into the future individual assets are expected to generate cash flows. We predict that...

Sales decreases affect earnings more than sales increases because of cost stickiness. We hypothesize that this correlated omitted variable constitutes a confounding effect in standard asymmetric timeliness models. Controlling for a piecewise linear effect of sales changes in these models...

Recent research documents the empirical phenomenon of ldquo;sticky costsrdquo; and attributes it to a theory of deliberate managerial decisions in the presence of adjustment costs. We refine this theoretical explanation and show that it gives rise to a more complex pattern of asymmetric cost...

We synthesize the growing literature on asymmetric cost behavior — a new way of thinking about costs and, by extension, earnings. While the traditional cost behavior model describes a mechanistic relation between activity and costs, this alternative view recognizes the primitives of cost...

Cost-volume-profit (CVP) analysis is based on a linear model of earnings behavior. However, recent research documents two potential sources of asymmetry in earnings: cost stickiness and conditional conservatism. We examine the implications of these asymmetries for CVP analysis and develop an...

The traditional view of cost behavior assumes a simple mechanistic relation between cost drivers and costs. In contrast, contemporary cost management research recognizes that costs are caused by managers' operating decisions subject to various constraints, incentives, and psychological biases....

We investigate analytically and empirically the relationship between demand uncertainty and cost behavior. We argue that with more uncertain demand, unusually high realizations of demand become more likely. Accordingly, firms will choose higher capacity of fixed inputs when uncertainty increases...