ATJ Asian Tax Journal

Asian Tax Journal

Print ISSN 1738-3323 Online ISSN 2733-9270

The Impact of the COVID－19 Pandemic on the Relationship between SG&A Signal and Future Economic Performance

  • Ki, Dohoon Department of Accounting, Hanbat National University

Asian Tax Journal Vol. 25 No. 1 (2024), pp. 129-154

Abstract

This study aimed to verify how the relationship between a company’s SG&A signal and its future economic performance had changed during the COVID－19 pandemic, which has caused global economic uncertainty and managerial uncertainty. To test the Hypothesis, this study first examined whether there were significant differences in selling, general and administrative expenses(hereafter, SG&A) cost behavior among companies listed on KSE and KOSDAQ following Anderson et al. (2003) and Anderson et al. (2007). Afterwards, the difference in the relationship between the SG&A signal and the future economic performance was examined through the interaction between the pandemic variable and the SG&A signal variable. As economic performance, this study uses changes in net income, operating income, sales, and stock prices. This study found that there are no significant difference in cost stickiness of SG&A expenses during the COVID－19 pandemic. On the other hand, this study found that statistically significant decrease in the positive relationship between the SG&A signal and the future economic performance during the COVID－19 pandemic. The empirical results imply that under long－term uncertainty factors such as the COVID－19 pandemic, managers’ aggressive cost management strategies that increase the SG&A ratio can actually worsen the company’s future economic performance. This suggests that the accuracy of the positive outlook is an important factor in determining the relationship between SG&A expenses and subsequent economic performance.

Keywords

  • Cost stickiness
  • Economic performance
  • Economic uncertainty
  • SG&A signal

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