Geopolitical risk, managerial ability and cost stickiness

We examine the impact of geopolitical risk on firms’ cost stickiness using a large sample of listed U.S. firms. Our findings reveal that geopolitical risk negatively affects cost stickiness, leading to lower cost stickiness. Channel analysis suggests that geopolitical risk influences cost stickiness behavior by tightening firms’ financial constraints. Furthermore, we demonstrate that managerial ability plays a crucial moderating role, with high-caliber managers effectively reducing cost stickiness and enhancing operational efficiency. In addition, firms with lower product differentiation experience a more pronounced decline in cost stickiness in response to geopolitical risk. Overall, we contribute to the literature by providing empirical evidence based on a sample of U.S. firms that geopolitical shocks influence cost behavior, offering useful insights for managers and policymakers.