This study explores motivations underlying managers' resource adjustments. We focus on the impact of incentives to meet earnings targets on resource adjustments and the ensuing cost structures. We find that when managers face incentives to avoid losses or earnings decreases, or to meet financial...

This study explores the relationship between changes in managerial risk-taking incentives and adjustments of firms' cost structures, particularly the operating leverage (fixed-to-variable cost ratio). We find managers reduce operating leverage by substituting fixed costs with variable costs,...