DO VARIABLE COMPENSATION FROM CEOs HAMPER ADJUSTMENT IN COST BEHAVIOR?

Abstract

This research investigated whether the variable remuneration of CEOs impairs the adaptation in the cost behavior of 206 Brazilian companies. Descriptive, documentary and quantitative research using regression. The period of analysis comprised 2011 to 2015. The results revealed that, in general, there is no asymmetry in costs behavior, as the increase in revenue is not reflected in a drastic increase in costs. On the other hand, companies achieve an adaptation in costs by reducing them when sales revenue decreases, resulting in cost symmetry. However, when analyzing the effect of variable remuneration on the relationship between increase/decrease in sales revenue and cost behavior, the results indicated an asymmetrical behavior of costs, that is, the variable remuneration impairs the adjustment in the behavior of costs, since that there was an asymmetry in costs when including the remuneration variable for CEOs. These findings provide evidence for managers to establish parameters on the behavior of costs, especially when there is an increase in company revenues, since this is usually linked to the variable remuneration of CEOs. Efficient control over the behavior of costs can reduce agency conflicts between managers with contracts linked to variable remuneration, shareholders and investors. This research contributes by analyzing perspectives of managerial accounting (cost behavior) and financial accounting (variable remuneration of CEOs), an incipient relationship in the international and national context. It contributes to organizations by revealing that variable compensation impacts the behavior of costs and helps managers to make accurate decisions based on cost analysis and compensation based on profit and shares.