The Effect of Agency Problems on Cost Stickiness and the Moderating Role of Corporate Governance Quality in Family and Non-Family Firms

Understanding cost behavior and identifying cost stickiness is crucial for internal and external stakeholders, as it influences company profitability and decision-making. Cost stickiness arises from the asymmetry in cost responses to changes in sales and can be affected by the agency problem, which often leads to inefficiency in cost reduction. The quality of corporate governance can play a significant role in mitigating the agency problem and reducing cost stickiness. On the other hand, family and non-family firms, due to their structural and managerial differences, provide an appropriate environment for examining these interactions. Therefore, the main objective of this study is to investigate the effect of the agency problem on cost stickiness in family and non-family firms, considering the moderating role of corporate governance quality. To this end, data from 141 companies listed on the Tehran Stock Exchange during the period from 2013 to 2022 have been used. Multiple regression models were applied to test the hypotheses. The findings indicate that the agency problem increases cost stickiness. Furthermore, the effect of the agency problem on cost stickiness is more pronounced in non-family firms compared to family firms. Additionally, high-quality corporate governance significantly reverses the direct impact of the agency problem on cost stickiness in both family and non-family firms. Understanding the interaction of these factors allows organizations to tailor their governance practices to their specific ownership structures, thereby reducing the risk of cost stickiness and ensuring financial sustainability.