This paper aims to examine whether the amount of costs disclosed as relating to environmental controls is associated with environmental performance in terms of carbon-based eco-efficiency, and whether any relation supports voluntary disclosure theory or legitimacy theory arguments. Further, this paper attempts to determine whether the relations differ across the initial Kyoto Protocol period. In this study, the focus was on Japanese firms over the period from 2002 to 2012. Disclosed environmental control costs (capital expenditures and operating costs) were identified and eco-efficiency measures based on carbon emissions were calculated. Relations were tested for using regression models controlling for other potential impact factors. This study’s results indicate a negative relation between disclosed levels of environmental control costs and eco-efficiency performance measures, and, for two of our three eco-efficiency metrics, this is more pronounced over the Kyoto Protocol period. These results support a legitimacy theory (as opposed to voluntary disclosure theory) explanation for the relation between the levels of disclosed environmental control costs and carbon-based eco-efficiency. This study is the first to explore how flexibility in cost classification may be used by companies to foster a disclosure strategy.

Recent research documents the phenomenon of sticky cost behavior where costs change asymmetrically between an increase and a decrease in sales and attributes this behavior to managers' deliberate decisions. In this paper, we test the relationship between sticky cost behavior and equity incentives. We find that a measure of the sensitivity of managerial wealth to stock price (delta) is positively related to sticky costs where costs increase more quickly in response to a sales increase than they decline in response to a sales decrease. Conversely, we find that a measure of the sensitivity of managerial wealth to stock volatility (vega) is positively related to anti-sticky costs where costs increase to a lesser extent in response to a sales increase than they decline in response to a sales decrease. These results indicate the importance that equity incentives have on managerial resource adjustment decisions in response to changes in firm activity levels. JEL Classifications: G32; G34.

The bullwhip effect is the phenomenon of distorted information that causes the amplification of variability of demand in supply chains. We examine the relationship between the bullwhip effect and cost behavior using a large sample of U.S. public firms from 1980 to 2019. Our empirical results show that the costs of firms with a higher intensity of bullwhip effect are significantly more responsive to changes in sales, suggesting that firms facing higher amplification of demand will adopt a less rigid short-term cost structure with lower fixed and higher variable costs. Furthermore, the bullwhip effect is associated with a higher elasticity of number of employees, operating leases, and rental expenses with respect to sales. The findings of mediation analyses suggest that firms are likely to lease capacity resources to increase the flexibility and manage the operating risk associated with the bullwhip effect. The results are robust to alternative model specifications. This study contributes to both the cost accounting and supply chain management literature, and documents large sample evidence on whether and how the bullwhip effect affects a firm’s choice of cost structure.