Study of Relationship between Costs Behavior and Changes in Bonus for Directors

Abstract

This research investigates the relationship between costs behavior and changes in bonus for the directors in the industrial food, drug, chemical, metal and car companies listed in the Tehran Stock Exchange, (TSE). In this study 58 companies has been investigated during 2008-2013, using panel data analysis method. The findings showed that there is positive and significant relationship between changes in returns on assets (ROA) created by costs behavior (normal and abnormal costs behavior) and changes in bonus to the directors, and that the relationship is of asymmetric type. These findings indicated that costs behaviour may affect the amount of bonus for the directors, and that the basis of bonus is of asymmetric type. Hence, it could be claimed that in the studied companies the directors are supported by allocating bonus to them blindly. In addition to the need to more attention to costs behavior at times of allocating bonus to the directors, the findings could be used indirectly to provide new mechanisms for determining fair bonus.

Keywords

• costs behavior
• changes in return on assets
• changes in cash bonus of directors