ABSTRACT
This paper examines the effect of mutual fund investments on the cost stickiness of the firms they follow. Using a sample of public Korean firms, we find that mutual fund investments reduce cost stickiness. Additional analyses further show that the positive influence of mutual funds monitoring becomes stronger for mutual funds that are in the same business group with the firms. Overall, the results suggest that mutual funds prevent suboptimal changes in costs when sales are declining, thus reducing cost stickiness, and this association is stronger when the transfer of information and knowledge is feasible.
Acknowledgement
This work was supported by Hankuk University of Foreign Studies Research Fund.
Disclosure Statement
No potential conflict of interest was reported by the authors.