Abstract

A sample of European firms engaging in corporate social responsibility (CSR) activities is investigated in this study with regard the occurrence of asymmetric cost behavior in their operating expenses under the umbrella of corporate governance structures. The empirical findings of the paper provide evidence that operating expenses exhibit cost stickiness in the case of firms with stronger engagement in CSR activities. The firms with high intensity of CSR engagement seem to exhibit less operating cost stickiness under stronger corporate governance mechanisms. The findings of this study suggest that in addition to economic factors, managers’ choices regarding adjusting costs may be influenced by corporate social responsibility engagement and governance mechanisms which could thus help explain operating costs’ behavior of European firms.

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