2024-01-20August 2022023-08https://hdl.handle.net/10657/15965My dissertation includes two papers on Asymmetric Cost Behavior. In the first paper, "Change in a Firm’s Access to Cash and Asymmetric Cost Behavior", I examine the effect of an increase in cash on managers’ resource adjustment decisions, as reflected in the asymmetric behavior of SG&A costs. I use the recent tax law change that resulted in tax savings for most firms as my setting. Using a sample of 10,970 firm years, I find that increased cash from reduced taxes is associated with decreased asymmetric cost behavior. Furthermore, the association is stronger when the cash increase is from a one-time tax saving. My results vary with the firm characteristics related to cash, such as cash holdings, financial constraints, and the future value-creating nature of SG&A costs, indicating that an increase in cash affects the firms’ operating decisions. Overall, my results show that the increased cash decreases managers’ cost constraints and plays a key role in the asymmetric cost behavior of firms. My study adds to the literature on asymmetric cost behavior. The second paper, "Reputation Risk and Firm Asymmetric Cost Behavior" is a joint work with Dr. Gerald J. Lobo and Dr. Devendra Kale. ESG is an area of growing economic importance. More and more investors are incorporating ESG into their investment decisions, making ESG crucial for firm value. However, maintaining ESG focus can also require significant investment in resources, which may not have immediate short-term benefits in terms of profitability. Exploiting this tension, we investigate how firms’ ESG risks influence their cost behavior (cost asymmetry). We find that as firms’ ESG risks increase, their cost asymmetry reduces. Further, we find that this relation significantly weakened after the onset of the COVID pandemic, when ESG initiatives received increased focus. We further show that our results are moderated by analyst following and institutional shareholding. This result also shows that managerial opportunism is a potential driver of our results. Our results are important for regulators as well as investors and hedge fund managers.application/pdfengThe author of this work is the copyright owner. UH Libraries and the Texas Digital Library have their permission to store and provide access to this work. Further transmission, reproduction, or presentation of this work is prohibited except with permission of the author(s).Asymmetric Cost Behavior, Tax savings, Reputation Risk2024-01-20Thesisborn digital