Alternative Econometric Models Research Articles

Assessing the Influence of Digital Inclusive Finance on Household Financial Vulnerability in China: Insights from Health Insurance Participations

Poverty reduction is the primary goal of the United Nations 2030 Agenda for Sustainable Development. Enhancing the purchase rate of health insurance is essential for alleviating poverty caused by health shocks, as it serves as a crucial risk management tool for addressing health-related risks. In this paper, we investigate the impact of digital inclusive finance on household participation in terms of health insurance and financial vulnerability, utilizing the Digital Inclusive Finance Index developed by Peking University and survey data from the China Household Finance Survey. Our findings indicate that the advancement of digital inclusive finance can significantly reduce the risk of household financial vulnerability by increasing household health insurance enrollment rate. The findings are robust across various digital inclusive finance indices, different metrics for financial vulnerability, alternative econometric models, and additional control variables. Furthermore, the effects of digital inclusive finance on health insurance enrollments and household financial vulnerability are particularly pronounced among urban households and those led by younger and more risk-averse household heads. Our findings advocate for further development of digital inclusive finance, mainly targeted at rural households and those with elderly heads, to enhance health insurance participation and mitigate the risk of illness-related poverty.

Model Specification and Inflation Forecast Uncertainty in the Case of Pakistan

Making a better estimate of Inflation can enable us to make a better guesstimate about its economic repercussions. In modern monetary economics, the standard Phillips Curve model (PCM), the New Keynesian Phillips curve model (NPCM), and the incomplete competition model (ICM) are the alternative econometric models specified to forecast Inflation. The present study intends to identify the appropriate inflation model based on its forecasting performance with its different specifications for Pakistan's Economy. PCM includes the output gap and unemployment rate, NPCM has forward-looking expectations and uses labor income share instead of the output gap, and ICM identifies the importance of incomplete information on labor and product markets and uses some error correction term (ECT) to forecast Inflation. The relevant ECT has overcome the omitted variable bias. ICM is better in visualization forecasting and has lower root mean square error and mean absolute percentage error than other inflation models. In conclusion, the wage-price dynamics model (ICM) offers the best prospect of a successful inflation forecast in the case of Pakistan.

Shaping a sustainable future: The impact of board gender diversity on clean energy use and the moderating role of environmental, social and governance controversies

AbstractThis study investigates how gender‐diverse boards are related to the adoption of clean energy and examines whether environmental, social, and governance (ESG) controversies have an impact on this link. The study analyzes 2395 firm‐year observations from 13 European countries from 2006 to 2021. Drawing on the gender socialization theory and diversity theory, the research reveals a favorable effect of board gender diversity on a company's utilization of clean energy. It also demonstrates that ESG controversies play a significant role in moderating this relationship. Furthermore, the study affirms the critical mass theory by indicating that companies with at least three female board members exhibit a greater use of clean energy. The findings are robust to various methods, such as controlling for endogeneity problems, propensity score matching, sub‐sample analysis, and alternative econometric models. This study's implications are important for stakeholders, policymakers, and managers. It suggests that having a gender‐diverse board can increase the adoption of clean energy, benefiting a company's reputation and attractiveness to stakeholders. Policymakers can use these findings to design policies that encourage gender diversity on boards and achieve environmental goals, while managers can make informed decisions about board composition and clean energy adoption.

Financial Literacy, Borrowing Behavior and Rural Households’ Income: Evidence from the Collective Forest Area, China

Since the introduction of a series of collective forest tenure reforms in China, diverse forestland mortgage financial products have been available even in rural areas. It is difficult for rural households to make appropriate financial decisions in order to increase their income due to a lack of financial knowledge and relevant skills. It is important to analyze the relationship between financial literacy, borrowing behavior, and rural household income. Based on the learning-by-doing theory, the credit constraint theory, and the data obtained from the survey of 460 households in five rural countries of Liaoning Province, alternative econometric models were used to estimate the “Financial Literacy-Borrowing Behavior-Household Income” transmission channel. The findings reveal that the financial literacy levels are positively associated with household income and that there is an inverted U relationship between them which is low on both sides and high in the middle. In addition, the financial literacy has a significantly positive effect on the farmers’ credit behavior, which in turn promotes their income growth. The results provide a new perspective on the study and a clear explanation of the role of financial literacy in improving the loan amountsavailable in China’s rural areas. The paper concludes with recommendations for policymakers to prioritize financial education that will promote and support credit constraint reduction in collective forest areas.

Managerial compensation and firm performance: The moderating role of managerial ownership and other governance factors

AbstractThis study looks at how executive compensation affects firm value and the extent to which this relationship is sensitive to managerial ownership and corporate governance factors. We use data from UK FTSE 100 firms for the period 2007–2012, generating a total of 578 firm‐year observations. Consistent with optimal compensation theory, we find that the managerial compensation –firm value is more sensitive to executives’ ownership levels and other corporate governance indicators. Our results remain robust to alternative econometric models. We contribute to the literature on corporate governance and firm value . While the paper builds on the executive bonus compensation literature, it also furthers our understanding on the extent to which managerial ownership, institutional ownership, board size and non‐executive ownership matter in the executive bonus compensation—corporate value relationship with specific emphasis on UK FTSE 100 firms. Our second contribution is related to the moderating role of managerial (executive) ownership. We show that as executives residual interests go up, managers become more conscious of the firm's idiosyncratic risk, and hence lessen their aggressive investment and financing strategies culminating in lower firm value.

Natural gas resource utilization, environmental policy and green economic development: Empirical evidence from China

Exploring the relationship between natural gas resource utilization, environmental policy, and green economic growth will help developing countries enact practical environmental and resources policy. China declared a “war on pollution” in 2014 in response to the worsening environmental pollution (called the “Atmosphere Ten Articles (ATA)” policy). Using the ATA policy in a quasi-natural experimental framework and adopting the quasi-difference-in-difference (quasi-DID) method, this paper conducts an empirical study based on hand-collated panel data of prefecture-level cities. The main findings are concluded as follows: (1) The ATA policy has a significant and negative impact on the green economic efficiency in Chinese cities. Essentially, this negative impact is a result of the more significant inhibitory effect over the reduction effect. The estimates are robust to various model specifications. (2) Chinese cities witnessed an increasing reduction in the green economic efficiency over time after implementing the ATA policy. (3) Heterogeneity analysis suggests that the negative effect mainly occurs in regions with relatively low natural gas utilization density, and we did not find such evidence in regions with high natural gas utilization density. These estimates are robust to alternative econometric model specifications, measurement methods, and identification strategies. The findings can provide new insights to understand the relationship between environmental policy, resource utilization, and green economic development.

Expansive or focused attention? An exploration–exploitation perspective on e‐Business systems and firm performance

This study posits that executive attention can significantly influence the impacts of customer‐facing electronic business (e‐Business) systems on firm performance. Using the exploration–exploitation perspective (EEP) as an overarching theoretical framework, and the theoretical lens of attention‐based view (ABV), we develop an integrated model to provide insights into the impacts of customer‐facing e‐Business systems on firm performance. We categorize the capabilities of customer‐facing e‐Business systems into e‐Transaction and e‐CRM (customer relationship management) capabilities as exploitation and exploration capabilities, respectively. Further, following ABV, we conceptualize focused and expansive attentions as two different types of executive attention that also incorporate exploitation and exploration orientations. We hypothesize e‐Transaction and e‐CRM capabilities to have nuanced interactive effects with focused and expansive attention on firm performance measured using return on sales and Tobin's Q. We use a panel dataset with 484 firm‐year observations from 180 firms to test our hypotheses. We estimate our models using a two‐step generalized method of moments (GMM) approach to address issues relating to endogeneity, heteroskedasticity, and serial correlation, and to produce efficient estimates. The results provide broad support for the hypotheses and are robust to the alternative measurement of dependent variables, alternative econometric model specification, and potential endogeneity from omitted covariates. The integrated model developed and empirically validated in this study serves to provide a deeper understanding of the impacts of customer‐facing e‐Business systems on firm performance. The study also highlights the need for dual attention processes on the part of senior executives to fully realize the benefits offered by these systems.

Growth opportunity and investment policy: The role of managerial incentives

Based on the neo‐classical theory of investment (Tobin's Q), this study looks at how growth opportunity drives investment policies and the extent to which this relationship is sensitive to managerial incentives. We use data from 213 non‐financial and non‐utility UK FTSE 350 firms for the period 2007–2015, generating a total of 1748 firm‐year observations. We uncover that growth opportunity firms invest more in fixed intangible assets but less in tangible capital assets activities. We further observe that the growth opportunity‐fixed intangible assets' investment is more sensitive to executive compensation incentives. Our results remain robust to alternative econometric models.

The Effect of Index Option Trading on Stock Market Volatility in China: An Empirical Investigation

In this study, we examine the effect of introducing SSE 50ETF index options trading on stock market volatility using a panel data evaluation approach. Based on the cross-sectional dependence among international stock indices and macroeconomic indicators, we estimate the counterfactual volatility of the SSE 50 index and find that the introduction of index options reduces stock market volatility significantly in the long term. The primary findings are robust to alternative econometric models, including principal component analysis, GARCH-family model, and LASSO regression. The results of this paper suggest that the introduction of SSE index options provides investors with risk management tools and improves price discovery in the stock market.

Impact of COVID-19 on listed European electricity companies: a comparative analysis of investment in renewable and traditional electricity

PurposeThe authors analyze the impact of COVID-19 on listed European electricity companies and differentiate between renewable and traditional electricity, to show the heterogenous characteristics of electricity subsectors and the differences between renewable and traditional electricity.Design/methodology/approachUsing the event study method, the authors calculate the cumulative average abnormal returns (ARs) before and after the World Health Organization pandemic announcement and the declaration of national lockdowns in Europe.FindingsThe results show that while the European electricity sector was overall negatively impacted by the COVID-19 announcement, this impact was larger for renewable companies due to their riskier investment profile. Moreover, after the national lockdowns came into effect, the recovery in the financial markets return was smaller for the latter.Research limitations/implicationsThere may be variables to be included in the model to analyze possible differences between companies and countries, as well as alternative econometric models. Limited to the data, the authors did not investigate the different impact of the economic policy uncertainty from various countries inside or outside the EU.Practical implicationsThe results have important implications for both investors and policymakers since the heterogenous characteristics of electricity subsectors. This heterogeneity prompts different investor reactions, which are necessary to know and to understand.Originality/valueAs far as the authors know, this is the first study that analyses the effect of COVID-19 in heterogeneity profile of both types of electricity, renewable and traditional.

Energy efficiency and sustainable development goals (SDGs)

This study attempts to connect Sustainable Development Goals (SDGs) with energy efficiency for 20 Asian and Pacific (AP) countries using Data Envelopment Analysis (DEA) from 2000 to 2018. The Panel Correction Standard Error (PCSE) estimates found that sustainable economic development and energy efficiency are positively related, suggesting that sustainable economic development is associated with increased energy efficiency. Similarly, we found that sustainable financial development is also positive, indicating that sustainable financial development increases energy efficiency. In further analyses, we confirmed a positive impact of green innovation on energy efficiency. The S-GMM estimator confirmed similar findings, showing robust to alternative econometric model. Based on these findings, we recommend policies that tend to promote sustainable economic and financial development.

Usage and Impacts of Technologies and Management Practices in Ethiopian Smallholder Maize Production

Maize yields can be improved through many individual technologies and management practices, but the full realization of potential benefits is generally understood to require integrated use of complementary practices. We employed two years of survey data and alternative econometric models to better understand the use of individual and bundled packages of technologies and management practices in Ethiopian maize production, i.e., fertilizers, improved varieties, herbicides, pesticides, manure, intercropping, erosion control and crop rotation (the last three labeled integrated management). Although fertilizer and improved varieties were used on 85% of maize fields, with average yields of 3.4 ton/ha, large yield gaps remain. Complementary management practices improved these yields by as much as 22%, although in variable ways. Integrated management contributed to maize yield only when combined with crop protection (herbicides and/or pesticides). Combining manure with fertilizer and improved variety decreased maize yields, possibly due to manure quality and less inorganic fertilizer used on fields that received manure. Packages including crop protection increased labor productivity by 16–70%, while using integrated management decreased labor productivity by almost half. In summary, the combination of management practices did not automatically lead to increased yields, partly related to the conditions under which practices were applied, indicating the need for site-specific research and recommendations for sustainable intensification.

Dynamic spillover analysis of international and Turkish food prices

AbstractThis study analyses the dynamic spillover relationship between international and Turkish food prices by employing Markov Switching Regression (MSR) and Dynamic Conditional Correlation Generalized Autoregressive Conditional Heteroscedasticity (DCC‐GARCH) models to monthly data from 2003 to 2019. We also investigate the factors that cause a price difference between Turkish and international food markets by employing alternative econometric models, including Autoregressive Distributed Lag (ARDL), Fully Modified OLS (FMOLS), Dynamic OLS (DOLS) and MSR. We find structural shifts in the dynamics of the international/domestic food price relationship, and the relationship varies across the low and high volatility regimes. We also find that the exchange rate significantly affects the growing difference between Turkish and international food prices, while oil prices reduce that difference. Our results point out essential policy recommendations for developing food policies and ensuring sustainability in prices.

BOARD CHARACTERISTICS, CORPORATE GOVERNANCE AND AGENCY PROBLEMS IN INDIAN COMPANIES

This research paper explores how the board characteristics and other external governance mechanisms mitigate the agency conflicts prevailing in the Indian corporate sector based on panel data of 315 companies drawn from the BSE 500 index (Bombay Stock Exchange) during the period 2008-2018. Utilising the panel OLS regression methodology, this research paper has derived two alternative econometric models based on the proxies of agency cost (operating ratio and Tobin's Q) as dependent variables and the independent variables as the board size, independent directors, CEO-Chairperson separation, audit committee, nomination, and remuneration committee, stakeholders' relationship committee, promoters' holdings, leverage, bank debt, and firm size. The descriptive statistics establish that the Indian companies are subjected to severe agency problems. The multivariate regression results reveal that the board characteristics as governance mechanisms are not successful in mitigating agency conflict in Indian companies. However, Indian companies have been gradually assimilating corporate governance mechanisms.

Are Trade Policies Performance Enhancing? The Special Case of the GCC Countries

Purpose – The purpose of this study is to investigate the extent to which trade policies affect the performance of firms in the six countries of the Gulf Cooperation Council (GCC): Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain, and Oman. The finance literature, theoretically and empirically, postulates that the efficient management of trade policies (i.e., trade debtors, inventory, and trade credit policies) relates positively to corporate performance. This study, however, conjectures that in a different and distinct business setting, corporate performance might not be related to how a firm manages its trade policies, or at least not significantly.Design/Methodology/approach – The study sample is comprised of all nonfinancial firms in the Gulf Cooperation Council (GCC) countries. The study uses several ratios in the literature to proxy for trade policies and corporate performance. It also employs related and alternative econometric models in order to corroborate the results.Findings – Contrary to a documented worldwide evidence, the results of the study reveal that short-term trade policies – specifically, trade debtors, inventory, and trade credit – have an insignificant or at most a trifling effect on corporate performance, for a set of nonfinancial listed firms in all six GCC countries.The results are robust to the econometric model, the profitability measure, and the country. This is probably because most GCC corporate managers have no concern about being financially constrained, which leads to less attention to aligning the optimal levels of working capital with the daily financing needs. Most firms in Gulf Cooperation Council (GCC) countries receive generous subsidies from their governments as part of lavish payments, in order to carry out development projects and other services for governmental agencies. The results of this study should be of great importance to GCC corporate managers and investors.Originality/Value – The study contributes to the literature by demonstrating that different cultural managerial practices might skew the already-established association among the financial variables and, hence, bring up new evidence. Also, the study implicitly suggests that further research in this area could reveal additional anomalous findings.

Impact of risk perception on household willingness-to-pay to restock the threatened staghorn coral

This study aims to examine whether individuals' attitudes toward the anthropogenic risks facing staghorn corals and coral reef ecosystems off the Southeast (SE) coast of Florida influence their valuation of coral reef ecosystem services and willingness to mitigate risks. We use preference data and psychometric measures characterizing the public's attitudes toward risk elicited through a stated preference survey and integrate them into alternative econometric valuation models to estimate willingness-to-pay (WTP) to restock and protect the threatened staghorn coral off the SE coast of Florida. The household WTP estimates for the restocking program, marine reserve and combined programs were $179.01, $96.60 and $275.61, respectively. Respondent WTP was strongly dependent on respondents' perception of the anthropogenic risks facing staghorn corals and coral reef ecosystems. Adjusting WTP for risk perception resulted in an average increase of 98% in perceived benefits from unadjusted WTP for the three hypothetical management programs examined. Factors found not to influence WTP include preference elicitation method, use of, and distance to, the resource in question. Coral reef management agencies may want to consider people's attitudes toward risk when designing their public education and engagement programs in support of coral reef restoration.

Impact of Agency Costs on Firm Performance: Evidence from Vietnam

An assumption in agency costs theory is that agency costs can exert a negative impact on firm performance. In this study, we examine the impact of agency costs on firm performance of Vietnamese listed companies. Our sample includes 736 companies in Vietnam during the period om 2010 to 2015. We find that agency costs exert a negative impact on firm performance. Our results are robust to alternative econometric models, including an instrumental variables technique and a system generalized method of moment model. In addition, we show that a debt instrument can be a useful tool to reduce the negative impact of agency costs on firm performance.

Common Ownership and Industry Profitability: A Crossindustry View

Our paper contributes to the common ownership debate by empirically assessing the link between common ownership and profitability as a proxy for market competition. Rather than focusing on single industries, as most related studies do, we assess the common ownership hypothesis in the aggregate, using a panel of about 3,000 U.S. firms in about 200 industries over a 21-year period. We hypothesize that if anticompetitive effects due to common ownership were present within individual industries, then the same anticompetitive outcomes should be observed when the data is expanded to cover all industries and over an extended period of time. We explore the statistical relationship between our chosen measure of common ownership and profitability across multiple model specifications, such as (1) two alternative econometric models, (2) different sets of control variables, (3) different time periods, and (4) four variations of MHHIΔ. We do not find conclusive evidence that common ownership is associated with industry-level profit margins.

Oil Factor in Economic Development

The research examines the role of oil in the world economy and the evaluation of the oil factor in the economy of Azerbaijan. The error correction model (ECM) has been used in terms of reliability of the obtained results, and assessment has been done by the FMOLS, DOLS and CCR co-integration methods. Engel-Granger and Phillips-Ouliaris co-integration tests have been used for checking the co-integration relations among variables. Times series have been checked whether they are unit root (Augmented Dickey-Fuller (ADF), Phillips-Perron (PP) and Kwiatkowski-Phillips-Schmidt-Shin (KPSS) as a methodology of the research. The results of the research reveal that daily oil production and consumption have less effect on the formation of the world oil prices. On the other hand, the impact of the world GDP and world industry production volume is a bit more. Generally, the influence of these factors on oil market has been reduced gradually. However, the reverse process is observed during the analysis of the influence of oil production and oil price on the main indicators of Azerbaijan and Kazakhstan. Therefore, Azerbaijan and Kazakhstan are an oil-exporting countries which is why their macroeconomic indicators, especially currency, GDP and DNP, heavily depends on the oil factor. The research has been limited but highlights the obtained results to some problems and this must be considered as a new source for future research. Thus, the similar studies have been considered to be done thoroughly on several alternative econometric models, but a lack of statistical information on a yearly basis and strong currency intervention constitute some barriers to transiting to a floating currency. The practical importance of the research is to prove that the dependency of the oil prices on the world GDP and world industry production, daily oil production and world oil consumption have decreased gradually. In the second part of the research, the dependency of the Azerbaijan and Kazakhstan economies on oil was proved. This might be a signal to transfer oil resources into human capital.

An econometric analysis of the Saudi Arabia's crude oil strategy

This paper provides an econometric analysis of Saudi Arabia's crude oil strategy, as related to market fundamentals and macro-economic factors. Specifically, we develop three alternative econometric models over the period 1980–2017. The empirical findings provide sufficient evidence on the drivers of Saudi Arabia's crude oil production strategy. The results show that the kingdom of Saudi Arabia has a long-term supply sharing strategy, resilient to short-run price fluctuations. Saudi Arabia's strategy, aims at meeting about half of the world demand increase, both in the long and the short run, leaving limited space to the rest of the world producers. Saudi Arabia's production strategy is slightly affected by the OECD stocks, only in the short-run, and it is rather competitive. We argue that its production is inelastic to world crude oil demand fluctuations. Saudi Arabia's production lends support to the trade-off theory, since the kingdom produces more crude oil to defend its total petroleum exports. Lastly, we argue that Saudi Arabia adjusts its production strategy away from the optimal production level, in order to meet wider policy goals, such as the preservation of its petroleum exports and its market share in the global crude oil market.