Does geopolitical risk alleviate the “sticky” cost behavior of firms? Evidence from India

This study explores how geopolitical risk (GPR) affects the “sticky” cost behavior of firms. Using a piecewise linear regression analysis on 11,180 firm-year observations from India for the period 2011–2020, we discover that GPR reduces asymmetry in the cost behavior of firms. These results imply that GPR incentivizes firms to adopt a more cautious approach to cost management practices in order to mitigate bankruptcy risks. Nevertheless, we find that financial constraints limit the ability of GPR to moderate the “stickiness” in the cost behavior of firms.