Does Geopolitical Risk Alleviates “Sticky” cost behavior of firms? Evidence from India

Abstract This research explores how geopolitical risk (GPR) influences the consistent cost patterns of companies. Using linear regression on data from 11,180 firm-year observations in India from 2011 to 2020, the study discovers that rising GPR reduces the asymmetry in firms' cost behavior. Additionally, it shows that financial constraints diminish the effectiveness of GPR in moderating the "sticky" cost behavior of firms. The results imply that GPR encourages companies to adopt more cautious cost management strategies to mitigate the risk of bankruptcy.