In this paper, I provide new empirical evidence on how public firms and private firms differ in their
management of corporate resources. Using a dataset of Korean public and private firms over the period
of 2000 to 2013, I find that public firms expend more resources as SG&A spending than private
firms do. Moreover, the asymmetric cost behavior- a tendency that SG&A spending decreases less
when sales decreases than it increases when sales increases - is more prominent for public firms than
private firms, whereas the opposite pattern is found during the financial crisis. It appears that
self-interested managers in public firms indulge in spending corporate resources, although a crisis may
attenuate this problem. Our evidence is consistent with the idea that agency conflicts are more prevalent
among public firms than among private firms, which results in asymmetric cost behavior. However,
I do not necessarily exclude other possible explanations.
Keywords : private firms, agency conflicts, cost behavior, cost asymmetry
Keywords : private firms, agency conflicts, cost behavior, cost asymmetry, financial crisis
