Cost asymmetry in the Italian Mutual Banks and comparison among Less Significant Banks
Keywords:
Cost Asymmetry, Mutual banks, Less Significant Banks, Efficiency, Credit Risk
Abstract
In this paper, we study the cost asymmetry in the Italian banking system. The analysis is conducted on a sample of Italian Less Significant Banks (including Mutual banks) during 2006-2019 time period. We find that asymmetric behavior in total costs, among Less Significant Banks, is higher in Mutual ones, and that the asymmetry in total costs significantly varies with different levels of credit risk. We also find that more efficient banks, whether Mutual Banks or not, mitigate total cost asymmetry.
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References
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5. Anderson, M. C., Banker, R. D., Janakiraman, S. N. (2003). Are selling, general, and administrative costs sticky? Journal of Accounting Research, 41(1), 47-63.
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8. Balakrishnan, R., Labro, E., Soderstrom, N. S. (2014). Cost structure and sticky costs. Journal of Management Accounting Research, 26(2), 91-116.
9. Banker, R. D., Chen, L. T. (2006). Predictive earnings using a model based on cost variability and cost stickiness. The Accounting Review, 81, 285-307.
10. Banker, R. D., Byzalov, D., Chen, L. (2013). Employment protection legislation, adjustment costs and cross-country differences in cost behavior. Journal of Accounting & Economics, 55, 111-127.
11. Banker, R. D., Byzalov, D. (2014). Asymmetric cost behavior. Journal of Management Accounting Research, 26, 43-79.
12. Banker, R. D., Byzalov, D., Ciftci, M., Mashruwala, R. (2014). The moderating effect of prior sales changes on asymmetric cost behavior. Journal of Management Accounting Research, 26, 221-242.
13. Becchetti, L., Ciciretti, R., Paolantonio, A. (2016). The cooperative bank difference before and after the global financial crisis. Journal of International Money & Finance, 69, 224-246.
14. Belina, H., Surysekar, K., Weismann, M. (2019). On the medical loss ratio (MLR) and sticky selling general and administrative costs: Evidence from health insurers. Journal of Accounting & Public Policy, 38(1), 53-61.
15. Bugeja, M., Lu, M., Shan, Y. (2015). Cost stickiness in Australia: Characteristics and determinants. Australian Accounting Review, 25, 248-261.
16. Calleja, K., Steliaros, M., Thomas, D. C. (2006). A note on cost stickiness: Some international comparisons. Management Accounting Research, 17, 127-140.
17. Chen, C. X., Lu, H., Sougiannis, T. (2012). The agency problem, corporate governance, and the asymmetrical behavior of selling, general, and administrative costs. Contemporary Accounting Research, 29, 252-282.
18. Chung, C. Y., Hur, S.-K., Liu, C. (2019). Institutional investors and cost stickiness: Theory and evidence. Journal of Economics & Finance, 47, 336-350.
19. Coccorese, P., Shaffer, S. (2020). Cooperative banks and local economic growth. Regional Studies, 55, 307-321.
20. Cohen, S., Karatzimas, S., Naoum, V. C. (2017). The sticky cost phenomenon at the local government level: Empirical evidence from Greece. Journal of Applied Accounting Research, 18, 445-463.
21. Cooper, R., Kaplan, R. S. (1991). The design of cost management systems: Text, cases, and readings. Prentice Hall.
22. Day-Yang, L., Shou-Wei, C., Tzu-Chuan, C. (2011). Resource fit in digital transformation - Lessons learned from the CBC Bank global e-banking project. Management Decision, 49, 1728-1742.
23. Del Gaudio, B. L., Previtali, D., Sampagnaro, G., Verdoliva, V., Vigne, S. (2022). Syndicated green lending and lead bank performance. Journal of International Financial Management & Accounting, 33, 412-427.
24. Di Tommaso, C., Pacelli, V. (2022). Does nonperforming loan securitization affect credit default swap spreads? Evidence from European banks. Journal of International Financial Management & Accounting, 33, 285–306.
25. Drake, L., Howcroft, B. (2002). An insight into the size efficiency of a UK bank branch network. Managerial Finance, 28, 24-36.
26. Ferri, G., Minetti, R., Murro, P. (2019). Credit relationships in the great trade collapse. Micro evidence from Europe. Journal of Financial Intermediation, 40, 100809.
27. Fiordelisi, F., Marques-Ibanez, D., Molyneux, P. (2011). Efficiency and risk in European banking. Journal of Banking & Finance, 35(5), 1315-1326.
28. Guenther, T. W., Riehl, A., Rößler, R. (2014). Cost stickiness: State of art of research and implications. Journal Management Control, 24, 301-318.
29. Habib, A., Hasan, M. M. (2019). Corporate social responsibility and cost stickiness. Business & Society, 58, 453-492.
30. Hall, C. M. (2016). Does ownership structure affect labor decisions? The Accounting Review, 91(6), 1671-1696.
31. Han, S., Rezaee, Z., Tuo, L. (2019). Is cost stickiness associated with management earnings forecasts? Asian Review of Accounting, 28(2), 173-211.
32. Hosomi, S., Nagasawa, S. (2018a). Study on downside risk of demand and cost behavior of local enterprises: Verification of local public enterprise manager’s decisions making based on a population estimate scenario in the future. Asia-Pacific Management Accounting Journal, 13, 21-44.
33. Hosomi, S., Nagasawa, S. (2018b). Empirical study on asymmetric cost behavior: Analysis of the sticky costs of local public enterprises. Asia-Pacific Management Accounting Journal, 13, 55-82.
34. Hsu, W.-H., Lin, C., Liu, H.-T. (2018). Customer-supplier relationship and cost structure. NTU Management Review, 28, 243-282.
35. Ibrahim, A. E. A., Ali, H., Aboelkheir, H. (2022). Cost stickiness: A systematic literature review of 27 years of research and future research agenda. Journal of International Accounting, Auditing & Taxation, 46, 100439.
36. Lee, E., Kim, C., Leach-López, M. A. (2021). Banking competition and cost stickiness. Finance Research Letters, 41, 101859.
37. Li, W. L., Zheng, K. (2017). Product market competition and cost stickiness. Review of Quantitative Finance & Accounting, 49, 283-313.
38. Kama, I., Weiss, D. (2013). Do earnings targets and managerial incentives affect sticky costs? Journal of Accounting Research, 51, 201-224.
39. Magheed, B. A. (2016). The determinants of the sticky cost behavior in the Jordanian industrial companies listed in Amman stock market. Journal of Accounting, Business & Management, 23, 64-81.
40. Masera, R. (2016). Verso Basilea 4: criticità per le banche e l’economia. Bancaria, 1, 2-17.
41. Meeusen, W., Van Den Broeck, J. (1977). Technical efficiency and dimension of the firm: Some results on the use of frontier production functions. Empirical Economics, 2, 109-122.
42. Minetti, R., Murro, P., Peruzzi, V. (2021). Not all banks are equal: Cooperative banking and income inequality. Economic Inquiry, 59(1), 420-440.
43. Montanaro, E., Tonveronachi, M. (2017). Vulnerabilità del sistema bancario italiano. Diagnosi e rimedi. Moneta e Credito, 70, 280299-368.
44. Noreen, E. (1991). Conditions under which activity-based costs provide relevant costs. Journal of Management Accounting Research, 3, 159-168.
45. Noreen, E., Soderstrom, N. (1994). Are overhead costs strictly proportional to activity?: Evidence from hospital departments. Journal of Accounting and Economics, 17(1-2), 255-278.
46. Noreen, E., Soderstrom, N. (1997). The accuracy of proportional cost models: Evidence from hospital service departments. Review of Accounting Studies, 2(1), 89-114.
47. Papi, L., Sarno, E., Zazzaro, A. (2017). The geographical network of bank organizations: Issues and evidence for Italy. In R. Martin & J. Pollard (Eds.), Handbook on the Geographies of Money and Finance (pp. 156-196). Edward Elgar Publishing.
48. Parlour, C. A., Winton, A. (2013). Laying off credit risk: Loan sales versus credit default swaps. Journal of Financial Economics, 107(1), 25-45.
49. Piatti, D., Cincinelli, P. (2019). Does the threshold matter? The impact of the monitoring activity on non-performing loans: Evidence from the Italian banking system. Managerial Finance, 45(2), 190-221.
50. Presti, G. (1998). Il governo delle banche popolari e di credito cooperativo. Banca Impresa Società, 1, 147-182.
51. Subramaniam, C., Watson, M. (2016). Additional evidence on the sticky behavior of costs. Advances in Management Accounting, 26, 275-305.
52. Venieris, G., Naoum, V. C., Vlismas, O. (2015). Organisation capital and sticky behaviour of selling, general and administrative expenses. Management Accounting Research, 26, 54-82.
53. Weber, A. (2017). Bank consolidation, efficiency and profitability in Italy. IMF Working Paper No. 17/175. Washington, DC: International Monetary Fund. Available at: https://www.imf.org/~/media/Files/Publications/WP/2017/wp17175.ash.
54. Weiss, D. (2010). Cost behavior and analysts’ earnings forecasts. The Accounting Review, 85(4), 1441-1471.
55. Xu, J., Sim, J. W. (2017). Are costs really sticky and biased? Evidence from manufacturing listed companies in China. Applied Economics, 49, 5601-5613.
56. Yang, D. (2015). Mergers, CEO hubris, and cost stickiness. Emerging Markets Finance & Trade, 51, 46-63.
57. Zanella, F., Oyelere, P., Hossain, S. (2015). Are costs really sticky? Evidence from publicly listed companies in the UAE. Applied Economics, 47, 6519-6528.
58. Zazzaro, A. (2001). Specificità e modelli di governo delle banche: un’analisi degli assetti proprietari dei gruppi bancari italiani. Moneta e Credito, 216, 487-517.
2. Alessandrini, P., Fratianni, M., Papi, L., Zazzaro, A. (2016). Banks, regions and development after the crisis and under the new regulatory system. Credit and Capital Markets, 4, 536-561.
3. Alessandrini, P., Papi, L. (2018). Banche locali e piccole imprese dopo la crisi tra nuove regole e innovazioni digitali. Money and Finance Research Group, Working Paper No. 148.
4. Altunbaş, Y., Carbó Valverde, S., Molyneux, P. (2003). Ownership and performance in European and US banking – A comparison of commercial, co-operative and savings banks. Fundación de las Cajas de Ahorros, Working Paper No. 180/2003.
5. Anderson, M. C., Banker, R. D., Janakiraman, S. N. (2003). Are selling, general, and administrative costs sticky? Journal of Accounting Research, 41(1), 47-63.
6. Angelini, P., Di Salvo, R., Ferri, G. (1998). Availability and cost of credit for small businesses: Customer relationships and credit cooperatives. Journal of Banking & Finance, 22, 925-954.
7. Argilés-Bosch, J. M., García-Blandón, J., Ravenda, D. (2023). Empirical analysis of the relationship between labour cost stickiness and labour reforms in Spain. Accounting & Finance, 63(Suppl. 1), 1187-1221.
8. Balakrishnan, R., Labro, E., Soderstrom, N. S. (2014). Cost structure and sticky costs. Journal of Management Accounting Research, 26(2), 91-116.
9. Banker, R. D., Chen, L. T. (2006). Predictive earnings using a model based on cost variability and cost stickiness. The Accounting Review, 81, 285-307.
10. Banker, R. D., Byzalov, D., Chen, L. (2013). Employment protection legislation, adjustment costs and cross-country differences in cost behavior. Journal of Accounting & Economics, 55, 111-127.
11. Banker, R. D., Byzalov, D. (2014). Asymmetric cost behavior. Journal of Management Accounting Research, 26, 43-79.
12. Banker, R. D., Byzalov, D., Ciftci, M., Mashruwala, R. (2014). The moderating effect of prior sales changes on asymmetric cost behavior. Journal of Management Accounting Research, 26, 221-242.
13. Becchetti, L., Ciciretti, R., Paolantonio, A. (2016). The cooperative bank difference before and after the global financial crisis. Journal of International Money & Finance, 69, 224-246.
14. Belina, H., Surysekar, K., Weismann, M. (2019). On the medical loss ratio (MLR) and sticky selling general and administrative costs: Evidence from health insurers. Journal of Accounting & Public Policy, 38(1), 53-61.
15. Bugeja, M., Lu, M., Shan, Y. (2015). Cost stickiness in Australia: Characteristics and determinants. Australian Accounting Review, 25, 248-261.
16. Calleja, K., Steliaros, M., Thomas, D. C. (2006). A note on cost stickiness: Some international comparisons. Management Accounting Research, 17, 127-140.
17. Chen, C. X., Lu, H., Sougiannis, T. (2012). The agency problem, corporate governance, and the asymmetrical behavior of selling, general, and administrative costs. Contemporary Accounting Research, 29, 252-282.
18. Chung, C. Y., Hur, S.-K., Liu, C. (2019). Institutional investors and cost stickiness: Theory and evidence. Journal of Economics & Finance, 47, 336-350.
19. Coccorese, P., Shaffer, S. (2020). Cooperative banks and local economic growth. Regional Studies, 55, 307-321.
20. Cohen, S., Karatzimas, S., Naoum, V. C. (2017). The sticky cost phenomenon at the local government level: Empirical evidence from Greece. Journal of Applied Accounting Research, 18, 445-463.
21. Cooper, R., Kaplan, R. S. (1991). The design of cost management systems: Text, cases, and readings. Prentice Hall.
22. Day-Yang, L., Shou-Wei, C., Tzu-Chuan, C. (2011). Resource fit in digital transformation - Lessons learned from the CBC Bank global e-banking project. Management Decision, 49, 1728-1742.
23. Del Gaudio, B. L., Previtali, D., Sampagnaro, G., Verdoliva, V., Vigne, S. (2022). Syndicated green lending and lead bank performance. Journal of International Financial Management & Accounting, 33, 412-427.
24. Di Tommaso, C., Pacelli, V. (2022). Does nonperforming loan securitization affect credit default swap spreads? Evidence from European banks. Journal of International Financial Management & Accounting, 33, 285–306.
25. Drake, L., Howcroft, B. (2002). An insight into the size efficiency of a UK bank branch network. Managerial Finance, 28, 24-36.
26. Ferri, G., Minetti, R., Murro, P. (2019). Credit relationships in the great trade collapse. Micro evidence from Europe. Journal of Financial Intermediation, 40, 100809.
27. Fiordelisi, F., Marques-Ibanez, D., Molyneux, P. (2011). Efficiency and risk in European banking. Journal of Banking & Finance, 35(5), 1315-1326.
28. Guenther, T. W., Riehl, A., Rößler, R. (2014). Cost stickiness: State of art of research and implications. Journal Management Control, 24, 301-318.
29. Habib, A., Hasan, M. M. (2019). Corporate social responsibility and cost stickiness. Business & Society, 58, 453-492.
30. Hall, C. M. (2016). Does ownership structure affect labor decisions? The Accounting Review, 91(6), 1671-1696.
31. Han, S., Rezaee, Z., Tuo, L. (2019). Is cost stickiness associated with management earnings forecasts? Asian Review of Accounting, 28(2), 173-211.
32. Hosomi, S., Nagasawa, S. (2018a). Study on downside risk of demand and cost behavior of local enterprises: Verification of local public enterprise manager’s decisions making based on a population estimate scenario in the future. Asia-Pacific Management Accounting Journal, 13, 21-44.
33. Hosomi, S., Nagasawa, S. (2018b). Empirical study on asymmetric cost behavior: Analysis of the sticky costs of local public enterprises. Asia-Pacific Management Accounting Journal, 13, 55-82.
34. Hsu, W.-H., Lin, C., Liu, H.-T. (2018). Customer-supplier relationship and cost structure. NTU Management Review, 28, 243-282.
35. Ibrahim, A. E. A., Ali, H., Aboelkheir, H. (2022). Cost stickiness: A systematic literature review of 27 years of research and future research agenda. Journal of International Accounting, Auditing & Taxation, 46, 100439.
36. Lee, E., Kim, C., Leach-López, M. A. (2021). Banking competition and cost stickiness. Finance Research Letters, 41, 101859.
37. Li, W. L., Zheng, K. (2017). Product market competition and cost stickiness. Review of Quantitative Finance & Accounting, 49, 283-313.
38. Kama, I., Weiss, D. (2013). Do earnings targets and managerial incentives affect sticky costs? Journal of Accounting Research, 51, 201-224.
39. Magheed, B. A. (2016). The determinants of the sticky cost behavior in the Jordanian industrial companies listed in Amman stock market. Journal of Accounting, Business & Management, 23, 64-81.
40. Masera, R. (2016). Verso Basilea 4: criticità per le banche e l’economia. Bancaria, 1, 2-17.
41. Meeusen, W., Van Den Broeck, J. (1977). Technical efficiency and dimension of the firm: Some results on the use of frontier production functions. Empirical Economics, 2, 109-122.
42. Minetti, R., Murro, P., Peruzzi, V. (2021). Not all banks are equal: Cooperative banking and income inequality. Economic Inquiry, 59(1), 420-440.
43. Montanaro, E., Tonveronachi, M. (2017). Vulnerabilità del sistema bancario italiano. Diagnosi e rimedi. Moneta e Credito, 70, 280299-368.
44. Noreen, E. (1991). Conditions under which activity-based costs provide relevant costs. Journal of Management Accounting Research, 3, 159-168.
45. Noreen, E., Soderstrom, N. (1994). Are overhead costs strictly proportional to activity?: Evidence from hospital departments. Journal of Accounting and Economics, 17(1-2), 255-278.
46. Noreen, E., Soderstrom, N. (1997). The accuracy of proportional cost models: Evidence from hospital service departments. Review of Accounting Studies, 2(1), 89-114.
47. Papi, L., Sarno, E., Zazzaro, A. (2017). The geographical network of bank organizations: Issues and evidence for Italy. In R. Martin & J. Pollard (Eds.), Handbook on the Geographies of Money and Finance (pp. 156-196). Edward Elgar Publishing.
48. Parlour, C. A., Winton, A. (2013). Laying off credit risk: Loan sales versus credit default swaps. Journal of Financial Economics, 107(1), 25-45.
49. Piatti, D., Cincinelli, P. (2019). Does the threshold matter? The impact of the monitoring activity on non-performing loans: Evidence from the Italian banking system. Managerial Finance, 45(2), 190-221.
50. Presti, G. (1998). Il governo delle banche popolari e di credito cooperativo. Banca Impresa Società, 1, 147-182.
51. Subramaniam, C., Watson, M. (2016). Additional evidence on the sticky behavior of costs. Advances in Management Accounting, 26, 275-305.
52. Venieris, G., Naoum, V. C., Vlismas, O. (2015). Organisation capital and sticky behaviour of selling, general and administrative expenses. Management Accounting Research, 26, 54-82.
53. Weber, A. (2017). Bank consolidation, efficiency and profitability in Italy. IMF Working Paper No. 17/175. Washington, DC: International Monetary Fund. Available at: https://www.imf.org/~/media/Files/Publications/WP/2017/wp17175.ash.
54. Weiss, D. (2010). Cost behavior and analysts’ earnings forecasts. The Accounting Review, 85(4), 1441-1471.
55. Xu, J., Sim, J. W. (2017). Are costs really sticky and biased? Evidence from manufacturing listed companies in China. Applied Economics, 49, 5601-5613.
56. Yang, D. (2015). Mergers, CEO hubris, and cost stickiness. Emerging Markets Finance & Trade, 51, 46-63.
57. Zanella, F., Oyelere, P., Hossain, S. (2015). Are costs really sticky? Evidence from publicly listed companies in the UAE. Applied Economics, 47, 6519-6528.
58. Zazzaro, A. (2001). Specificità e modelli di governo delle banche: un’analisi degli assetti proprietari dei gruppi bancari italiani. Moneta e Credito, 216, 487-517.
Published
2024-08-08
How to Cite
Piatti, D., Cincinelli, P., Cattaneo, C., & Bassani, G. (2024). Cost asymmetry in the Italian Mutual Banks and comparison among Less Significant Banks. European Scientific Journal, ESJ, 32, 138. Retrieved from https://eujournal.org/index.php/esj/article/view/18428
Section
ESI Preprints
Copyright (c) 2024 Domenico Piatti, Peter Cincinelli, Cristiana Cattaneo, Gaia Bassani
This work is licensed under a Creative Commons Attribution 4.0 International License.
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