Cost stickiness and firm profitability: A study in Saudi Arabian industries

  • 77 Views
  • 15 Downloads

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License

This study examined the impact of cost stickiness on firm profitability in different industrial sectors in Saudi Arabia. The sample size for the study consists of 102 companies listed on Tadawul (Saudi Stock Exchange) from 2009 to 2018. The study estimated a panel regression using pooled OLS, fixed and random effects, and Generalized Method of Moments (GMM). The variable Return on Investment (ROI) is used as a proxy to measure a firm’s profitability. The results of all the three models are similar to each other. The study found a negative and significant correlation between profitability and cost stickiness, indicating firms’ inability to control the selling, general and administrative costs (SG&A), ultimately leading to lower profits. In addition, firm size is positively associated with profitability, indicating that larger firms are more profitable compared to smaller ones, while the leverage is negatively related to profitability, indicating that companies have higher debts.

view full abstract hide full abstract
    • Table 1. Variables and their expected sign
    • Table 2. Descriptive statistics
    • Table 3. Correlation analysis
    • Table 4. Pooled regression results
    • Table 5. Panel results with fixed and random effects
    • Table 6. GMM estimation results
    • Conceptualization
      Abdulwahid Ahmed Hashed Abdullah
    • Data curation
      Abdulwahid Ahmed Hashed Abdullah
    • Formal Analysis
      Abdulwahid Ahmed Hashed Abdullah
    • Investigation
      Abdulwahid Ahmed Hashed Abdullah
    • Methodology
      Abdulwahid Ahmed Hashed Abdullah
    • Project administration
      Abdulwahid Ahmed Hashed Abdullah
    • Supervision
      Abdulwahid Ahmed Hashed Abdullah
    • Validation
      Abdulwahid Ahmed Hashed Abdullah
    • Visualization
      Abdulwahid Ahmed Hashed Abdullah
    • Writing – original draft
      Abdulwahid Ahmed Hashed Abdullah
    • Writing – review & editing
      Abdulwahid Ahmed Hashed Abdullah