The Effect of Risk Attitude of Managers on the Relationship between Demand Uncertainty and Cost Structure through Firm Life Cycle- An Empirical Study

This Paper aims to investigate the relationship between demand uncertainty (DU) and cost structure flexibility (CSF), in addition to test the effect of risk attitude of managers (RAM) on that relationship through different stages of firms' life cycle (FLC) and this reflects the importance of the current study and makes it unique from previous studies.
 The researcher developed the model of (Banker et al, 2014 ''b''), by using number of dummy and interactive variables, to split the observations according to (RAM) through different stages of (FLC).
The current study used the model of (Bo and Sterken, 2007) to distinguish between (RAM) even they are risk averse or risk takers, and used the model of (Dickinson, 2011) to distinguish between different stages of (FLC) by using cash flow from operations, investment and financing.
The researcher used a random sample of (76) industrial firms belonging to the transformational industries sector, during the period from 2010 to 2017, with a total number of observations (535) using unbalanced panel data.
The study applied the statistical programming of (Eviews version, 10) and (Fixed Effect Model) to test the first hypothesis which states ''There are no differences in the relationship between (DU) and cost structure (CS) through different stages of (FLC) in the Egyptian environment''. And the method of (Weighted Least Squares ''WLS'') to test the second hypothesis which states ''There are no differences in the effect of (RAM) on the Relationship between (DU) and (CS) through different stages of (FLC) in the Egyptian environment''.
Finally, all regression models used in testing the hypotheses were estimated by using (Robust Standard Errors) to get rid of both problems (Serial Correlation, Heteroscedasticity).
The results indicated that, null of both hypotheses of the study have been rejected, due to first: the value difference in the negative effect of (DU) on (CSF) through different stages of (FLC), espesically on maturity, shakeout, and introduction. Second: the value difference in the negative effect of (RAM), on the relationship between (DU) and (CSF), through different stages of (FLC), espesically on firms which managers are higher-risk takers, compared to firms with managers who are risk averse.