Bond Dynamic Panel Research Articles

Impact of Board Committee Characteristics on Social Sustainability Reporting in Sub-Saharan Africa: The Moderating Role of Institutional Ownership

The corporate strategic planning of businesses in sub-Saharan Africa (SSA) largely focuses on immediate financial performance with minimal credence to social sustainability. Thus, studies on the linkage between corporate governance (CG) and sustainability reporting have focused on developed economies. This study therefore investigated the role of institutional ownership in the impact of board committee characteristics on social sustainability reporting. This study involved strongly balanced panel data with 1969 observations of 275 publicly listed non-financial firms in SSA within the timeframe of 2012 to 2021. Data were analyzed using STATA 14.1. The hypotheses were tested using the two-step system of the generalized method of moment (GMM) using the Arellano–Bond dynamic panel data estimation method. The rate of social sustainability reporting was 39.4%. Relatively, Mauritian and South African firms had the most effective board committee characteristics and higher levels of social sustainability reporting. Although institutional ownership had no significant effect on social sustainability reporting, it moderated the effect of sustainability committee independence and sustainability committee gender diversity on social sustainability reporting. This paper presents a new perspective on the corporate governance and social sustainability literature by examining the effect of institutional ownership on board committee characteristics and social sustainability reporting in SSA. In terms of policy implication, there is the need for mandatory regulatory and legal CG framework that is regularly updated at national and regional levels in SSA to motivate listed firms to establish sustainability committees with efficient characteristics to promote social sustainability reporting.

Globalization, technology and global health

Purpose This study aims to explore whether globalization and technology are harmful to health using a global panel data set of 52 countries over the period 1990–2019. Design/methodology/approach The study focused on four continents: Africa, the Americas, Asia/Oceania and Europe. The authors used four advanced econometric methodologies, which include the standard panel fixed effect (FE), Arellano–Bover/Blundell–Bond dynamic panel, Hausman–Taylor specification and two-stage least squares (FE-2SLS)/Lewbel-2SLS approaches. Findings The empirical evidence highlights the significance of globalization and technology in promoting global health. The findings suggest that globalization has various impacts on global health indicators and that technology is useful in tracking, monitoring and promoting global health. In addition, the empirical evidence indicates that a truly health-centred process of globalization and technological innovation can only be realized by ensuring that the interests of countries and vulnerable populations to health risks are adequately considered in international decision-making regarding global economic integration. Originality/value The authors suggest that achieving the aspiration of global health will entail the use of globalization and information technology to extend human activities and provide equal access to global health.

Under-identification of structural models based on timing and information set assumptions

We revisit identification based on timing and information set assumptions in structural models, which have been used in the context of production functions, demand equations, and hedonic pricing models (e.g. Olley and Pakes, 1996, Blundell and Bond, 2000). First, we demonstrate a general under-identification problem using these assumptions in a simple version of the Blundell–Bond dynamic panel model. In particular, the basic moment conditions can yield multiple discrete solutions: one at the persistence parameter in the main equation and another at the persistence parameter governing the regressor. We then propose a possible solution in the simple setting by enforcing an assumed sign restriction and discuss more general practical advice for empirical researchers using these methods.

Corporate Sustainable Growth, Carbon Performance, and Voluntary Carbon Information Disclosure: New Panel Data Evidence for Chinese Listed Companies

At present, to comply with carbon reduction commitments, China has only required energy-intensive enterprises to report their carbon information to regulators, aside from mandatory public disclosures. Although some enterprises have been disclosing their own carbon information voluntarily by means of corporate reports in order to shape their green image, their carbon information disclosures (CID) still need to be improved. This study attempts to systematically investigate links between corporate growth, carbon emission (CEP) or reduction performance (CRP) in two forms (intensity and amount), and CID in industries with different carbon intensities on the basis of stakeholder theory as well as legitimacy theory. This study took Chinese companies listed on the main board market from 2009 to 2021 as samples. The Arellano–Bover/Blundell–Bond dynamic panel data model was used for regression analysis. Results showed that sustainable growth enhanced the promotion effect of CEP (both in terms of intensity and amount) on CID in carbon-intensive industries, while sustainable growth enhanced the inhibition effect of CEP measured in terms of amount, rather than intensity, on CID in low-carbon industries. This revealed that CEP, not CRP, had a significant influence on CID, and uncovered the influence mechanism between carbon performance and CID from the perspective of sustainable enterprise growth. The carbon information disclosure of high-carbon industries is closely and positively related to carbon performance, indicating that the interaction between high-carbon industries and capital markets will be more affected by the mitigation of carbon information asymmetry. Further, circulating A-shares are moderators for better CID in both carbon-intensive industries and low-carbon industries, which fits the expectation of stakeholder theory as well as legitimacy theory. Additionally, measurement habits or preference for carbon emissions performance (in the form of amount or intensity) in different industries should be brought to the forefront to enhance investors’ confidence in CID. This study has certain guiding value for the formulation of CID standards and contributes to the process of mandatory CID.

Pooling cross-sectional and time series data for estimating causality between technological innovation, affluence and carbon dynamics: A comparative evidence from developed and developing countries

The trends in affluence and carbon emissions remain a concern in view of the pressing need to establish conditions for sustainable development. Scientific evidence reveals that if far-reaching reforms of technological innovation are not undertaken, the environment will deteriorate beyond repair, which will be detrimental to the development agenda. Our study explored whether technological innovation has failed to anticipate the rise in affluence factors that dictate the level of economic activities and associated carbon emissions. We analysed the relationships between technological innovation and affluence and carbon emissions. The empirical strategy followed the standard panel fixed effects, Arellano–Bover/Blundell–Bond dynamic panel analysis, and the Hausman–Taylor methodology. The results of our dynamic econometric tests did not reject the Stochastic Impact by Regression on Population, Affluence, and Technology framework for the successful reduction of carbon emissions through technological innovation. Our findings further suggest that improved technological innovation can not only predict and identify carbon emissions but may also be used to monitor and mitigate their impacts. We recommend strategies for promoting technological innovation to accelerate reductions in carbon emissions without compromising sustainability.

Ownership Structure and Earnings Management in View of Effective Monitoring and Myopic Institutions Hypothesis: A Dynamic Panel Estimation

The current research envisages the ownership structure and earnings management nexus in the context of the effective monitoring hypothesis and myopic institutions hypothesis. The ownership aspects, including, shareholdings by the management, institutions, foreign institutions, pension funds, investment companies, and mutual funds are analyzed. The study follows Kothari et al. (2005) for the estimation of discretionary accruals and applied Arellano and Bond dynamic panel estimation to test the models based on a sample of 206 non-financial firms over the period of 2015–2019. The results of the study supported the agency theory, effective monitoring hypothesis, and myopic institutions hypothesis. Consistent with the previous empirical studies, the results reveal that managerial and institutional ownership curtails earnings management practices and discourages myopic management. Furthermore, the analysis of institutional investors based on their investment objectives reveals that the ownership of pension funds and investment companies restrains earnings management practices. On the other hand, discretionary accruals increase monotonically due to the existence of ownership by mutual funds. Furthermore, the study also provides a beer insight to regulatory authorities in order to design policies in such a way that ensures the protection of minority shareholders.

How far corporate governance and firms' characteristics are relevant toward environmental sustainability? An empirical investigation

PurposeThe study aims to focus to ascertain the consequence of corporate management and different firms' characteristics on environmental sustainability.Design/methodology/approachThe sample includes 78 non-financial NSE 100 listed companies from 2010 to 2020. Here, the static and Arellano–Bond dynamic panel data model is considered to determine the effect of corporate governance mechanisms and different firms’ characteristics on environmental performance.FindingsThe empirical findings of this study indicate that board size is negatively related with environmental sustainability. Similarly a positive influence of age, size and market-based financial performance can be seen on sustainability of the firm.Originality/valueThe present study takes an initiative to determine endogeneity and the dynamism effect of corporate governance factors and specific firms' characteristics on environmental sustainability from an emergent nation.

Does board independence influence CSR performance? A GMM-based dynamic panel data approach

PurposeThe study aims to explore and establish the relationship that exists between board independence and corporate social responsibility (CSR) practices of Indian firms.Design/methodology/approachA sample of 76 non-financial companies listed on the National Stock Exchange has been considered for a period of seven years (from 2013 to 2019). The study has used several statistical tools such as the static panel data model and the Arellano–Bond dynamic panel data model based on generalized method of moments approach.FindingsThe results of the analysis have indicated board independence to have a significant positive relationship with the firms’ CSR performance. However, board size and number of board meetings have been found to have a negative relationship with CSR. Further, outcomes have also revealed that variables such as companies’ size and liquidity have a positive effect on the extent of CSR activities performed.Practical implicationsThe firms which have the intention to engage in impactful CSR activities should support the independent directors’ participation in companies’ boards. The study’s findings suggest the companies to appoint independent directors strategically, keeping in mind the requirements of their board. Also, the independent directors selected should be independent in true sense, i.e. they should not be acquaintances of the company’s chief executive officer. This would ensure unbiased decision-making and would enhance the company’s CSR performance.Originality/valueIn India, CSR has gained great importance. So much so that it was made mandatory by the Companies Act, 2013. However, research studies that may assist in understanding the influence of board independence on Indian firms’ CSR performance are still scarce. The present study would foster value to the existing set of limited literature. Besides, the study has considered the dynamic nature of the relationship and has also controlled the endogeneity bias which has been examined by few studies in the past.

Relating Determinants of Profitability of Commercial Banks in India with Selected Financial Variables: a Dynamic Panel Data Analysis

This article analyses the elements that determined the success of India's commercial banks between 1992 and 2016. Arellano and Bond's Dynamic Panel Data is used for the unbalanced panel data of 80 banks in India during the reform period, broken down into three ownership groups: Public Sector Banks, Domestic Private Banks, and Foreign Banks. The research also considers the NIM and ROA as supplementary measures of bank profitability. The Return on Assets (ROA) compares the profitability of a bank to its total asset base, while the Net Interest Margin (NIM) measures the profitability of the bank's interest-bearing activities. Explanatory variables include bank-specific (BS), industry-structural (IS), macroeconomic (ME), and other-specified (OS) factors. The empirical results demonstrate that industry-specific and macroeconomic factors, in addition to the banks' inherent features, impact profitability. Profitability of Indian banks is found to be heavily influenced by political and ownership issues. However, the profit-influencing factors differed widely among the groupings.

Linking Top Leader Turnover to the Performance of Public Organizations: Evidence from New York City Public High Schools

Limited research has taken the contingency perspective to analyze the conditions under which the impact of top leader turnover on public organizations’ performance may vary. Using panel data from New York City public high schools, this study not only examines the main effect of principal turnover on schools’ performance but also how the main effect depends on schools’ baseline performance. Two estimation strategies—namely fixed effect models and Blundell–Bond dynamic panel models—find a consistent pattern that leader turnover is negatively associated with subsequent organizational performance, and the negative impact is stronger in low-performing organizations than it is in high-performing organizations. This study contributes to the literature by showing that the disruptive effects of leader turnover outweigh the adaptive effects in some public organizations. Moreover, the contingency perspective highlights the role of pre-turnover performance in moderating the effect of leader turnover.

How far the ownership structure is relevant for CSR performance? An empirical investigation

PurposeTaking hints from the lacunas in the field of ownership structure and corporate social responsibility (CSR) performance of the firms in India, especially when the moderating effect of certain corporate governance mechanism comes into play, this study aims to attempt to fulfill the gap by exploring the ownership structure of the firm (i.e. foreign ownership, institutional ownership and government ownership) and the CSR performance of the firm, when moderated by board independence of the firm. In an additional analysis, the study explores the non-linear effect of foreign ownership structure on the CSR performance in the Indian context.Design/methodology/approachThe study incorporates a strongly balanced panel data set of 280 non-financial National Stock Exchange 500 listed firms for the study period of 2013–2019. The study uses both static and Arellano–Bond dynamic panel model under generalized method of moments (GMMs) framework to establish the relationship between the studied variables.FindingsThe study acknowledges a positive impact of the foreign investors in the CSR performance of Indian firms with a higher proportion of independent directors on the board. The study further finds a contrarian role of government ownership in Indian context among the sampled firms. The study also in its extended analysis finds a non-linear inverted U-shaped relationship between foreign ownership (FO) and the CSR performance, which shows that FO positively impacts the CSR performance until a threshold level of 34% after which the curve starts declining.Practical implicationsOne of the major implications this study provides for the corporate policymakers is that the firms with a string penchant for philanthropic activities such as CSR should be concerned with attracting more foreign investors in their shareholding. Also, a higher proportion of independent directors on the board boost the engagement of the firm in CSR works.Originality/valueThe moderating effect of board independence in the ownership structure–CSR relationship attempted by this study is a rare attempt in a developing economy, such as India, and offers a fresh dimension to the study. Also, the non-linearity relationship between FO and the CSR performance and the threshold level providing the twofold effect of the variables is an innovative research attempt, especially in regard to a developing country like India.

The criticality of financial development and energy consumption for environmental sustainability in OECD countries: Evidence from dynamic panel analysis

ABSTRACT This study explored whether financial development and energy consumption affect environmental sustainability in Organization for Economic Cooperation and Development (OECD) countries. The empirical evidence used in this study was based on the standard fixed effects and the Arellano-Bover/Bundell Bond dynamic panel approach. Our empirical results demonstrated the importance of a financial development index and energy efficiency for reducing carbon emissions and promoting sustainability in the OECD. The mechanism through which financial development affects carbon emissions has been identified as energy consumption and foreign direct investment. Our study recommends that financial development be prioritised alongside investments in energy efficiency to promote environmental sustainability.

Profitability determinants of infrastructure public private partnerships (PPPs): empirical evidence from Indian data

PurposeThe purpose of this study is to empirically investigate the variables having an impact on profitability of public private partnerships (PPPs) in India using a balanced panel data of 171 unlisted PPPs from different infrastructure sectors such as road, power generation, real estate and ports.Design/methodology/approachEstimations were done using Arellano–Bond dynamic panel data estimation and seemingly unrelated regression models on a balanced panel data of 855 firm-years for 171 unlisted PPPs in India. To further test the estimation robustness, panel-corrected standard errors model was used.FindingsThe study findings indicate that in firm-specific factors, leverage, size, non-debt tax shield, growth and risk have significant positive impact on PPPs’ profitability, whereas in macroeconomic factors, only inflation has significant positive relationship. Although the relationship of all determinants is in sync with various theories and approaches, but these are not significant. Using the robustness test, the results are found to be robust and consistent with resource-based view and strategy-structure-performance approaches.Practical implicationsAs PPPs are gaining prominence in the development of infrastructural resources, their profitability is of significant importance to drive private investments in infrastructure development, the identification of factors which determine profitability is critical for researchers, practitioners, policymakers and fund providers such as equity investors and debt providers.Originality/valueThe empirical literature on profitability determinants is focused on various sectors including small and mid-size enterprises (SMEs) and micro firms, but to the best of the authors’ knowledge, this is the first study, in both developed and developing economies, to empirically investigate the determinants of profitability for PPPs.

Impact Assessment Study of NPAs and Rate of Recovery: Are Private Sector Banks in India Better off?

Our study significantly contributes in understanding a comparative framework and the interactions of idiosyncratic and systematic factors for determining non-performing assets (NPA) and rate of recovery for banks in India, as put forward by Basel committee. Although determinants of NPA is very well debated issue, the comparison of public and private sector banks in terms of their assets quality i.e. NPAs and rate of recovery and their determinants like collateral, operational inefficiency, GDP growth rate etc. are the added contribition of this study. We have employed Arrelano–Bond dynamic panel method on 35 banks in India for the period 1998–1999 to 2017–2018 for determinants of NPAs, while determinants of rate of recovery are studied for the period 2003–2004 to 2017–2018. Our findings show that the priority sector loan has significant differences in determining NPA across banks despite them having sufficient collateral. The negative relationship between collateral and recovery, especially for private sector banks, signifies low recovery for illliquid collateral. This study may recommend that a bank with high net interest margin (NIM), high proportion of secured and liquid collateral, and sufficient mix of long- and short-duration loans in line with bank’s asset liability policy can manage their portfolio well.

The dynamics of organizational reputation and status: momentum and volatility

PurposeOrganizational reputation and status are similar yet distinct constructs, serving as signals conveying information about an organization and its products and thus constituting audiences' perceptions about the organization. However, compared to status, reputation tends to change more dynamically over time. In this study, the authors argue that the dynamic traits of reputation – particularly, its momentum and volatility – may serve as additional signals and/or noises, influencing potential exchange partners' perception about the organization and thereby determining its status.Design/methodology/approachThe authors test our hypotheses in the context of the US venture capital firms between 1990 and 2010. The authors collected 8,793 firm-year observations of 1,186 VC firms and used the Arellano–Bover/Blundell–Bond dynamic panel estimation method to estimate their model.FindingsThe authors’ findings show that reputation momentum has a positive effect on status, whereas reputation volatility does not have a significant direct effect. However, the authors found that volatility has indirect effects on status, serving as a noise weakening the signaling effects of reputation and its momentum.Originality/valueThis paper contributes to the literature on organizational reputation and status by suggesting the importance of considering the dynamic traits of organizational reputation, which are indeed the crucial factors that distinguish reputation from status. Also, this study provides managerial implications for the organizations that aim to enhance their status through managing their reputation.

Receptiveness of effective tax rate to firm characteristics: an empirical analysis on Indian listed firms

PurposeThe purpose of this paper is to empirically investigate the factors deriving effective tax rate (ETR) for Indian manufacturing firms in different sectors. The study also tries to analyze the sensitiveness of ETR because of shocks on its key determinants.Design/methodology/approachThe study is using Arellano–Bond dynamic panel regression model to identify the key drivers of ETR, and impulse response functions of panel vector auto-regression model to analyze the response of ETR because of one standard deviation (SD) shock to its key determinants.FindingsThis study concludes that ETR is significantly explained by firm size, profitability, growth rate and non-debt tax shield in most of the sectors, and debt ratio, asset tangibility and age of the firms are impacting ETR differently across sectors. In case of entire manufacturing sector, firm size, profitability, growth and non-debt tax shield are driving ETR positively and asset tangibility is driving ETR negatively. Interest coverage ratio (ICR) and firm age are not significant drivers of ETR. ETR is positively related with firm size, but responses negatively when there is an immediate shock to firm size. Similarly, ETR is negatively related with asset tangibility, but responds positively following an immediate shock to it. Overall, ETR is more sensitive and responses significantly because of shocks in firm size, profitability, growth, asset tangibility and non-debt tax shield whereas, the response is very marginal following shocks to debt ratio, ICR and age of the firm.Research limitations/implicationsFirm managers may find the study useful to understand the receptiveness of ETRs at each sector level. The empirical findings are not only validating the theoretical developments but also providing a root cause analysis to the firm managers to understand the cause and consequence of ETRs for firms at different sectors.Originality/valueEmpirically investigating the factors driving ETR and analyzing its sensitiveness because of one SD shock on its key determinants for Indian manufacturing firms from different sectors is the originality of this study. Developing a strong theoretical background and empirically validating it through advanced methodology makes the study unique.

Circular Economy Innovation and Environmental Sustainability Impact on Economic Growth: An Integrated Model for Sustainable Development

This study examines the link between selected indicators of a circular economy, including essential components of environmental and economic growth. Developed economies are continuously innovating to promote growth and giving governmental support to the producers to move from linear economies to circular ones. Hence, waste materials in industrial systems are recycled or re-used, improving the efficiency of using finite resources with the no-waste approach. The aim of this paper is the following: (1) to identify the main components of a circular economy, which are also supportive of sustainability and development; (2) to check the impact of these variables in the economic growth of European Union countries; (3) to find out if the three components of sustainable development adopted to circular economy (CE) indicators (environmental–social–economic) are significant to economic growth. We used a fixed effect panel data analysis to identify the circular economy’s impact on the economic growth of European countries. Additionally, to support the results of the regression analysis, we employed a second method—generalized methods of moments—computing the Arellano–Bond dynamic panel data estimation method. The model included five independent variables, such as environmental tax rate, a recycling rate of waste, private investment and jobs in a circular economy, patents related to recycling, and trade of recyclable raw materials. The identification of each variable was made based on a deep search through literature. The results of both econometric models showed a strong and positive correlation between a circular economy to economic growth, highlighting the crucial role of sustainability, innovation, and investment in no-waste initiatives to promote wealth.

Comparative analysis of profitability of real estate, industrial construction and infrastructure firms: evidence from India

PurposeThis study aims to identify the most profitable segment of construction firms amongst real estate, industrial construction and infrastructure. This paper also examines the determinants of profitability of real estate, industrial construction and infrastructure firms.Design/methodology/approachThe data of 67 firms (20 real estate, 21 industrial construction and 26 infrastructure) is collected for a 15-year period (2003–2017). Two models are created using total return on assets (ROA) and return on invested capital (ROIC) as dependent variables.. Leverage, liquidity, age, growth, size and efficiency of the firm are identified as firm-specific independent variables. Two economic variables, i.e. growth in GDP and inflation, are also used as independent variables. Initially, the models are tested for stationarity, multicollinearity and heteroscedasticity, and finally, the coefficients are estimated using Arellano–Bond dynamic panel data estimation to account for heteroscedasticity and endogeneity.FindingsThe results suggest that industrial construction is the most profitable segment of construction, followed by real estate and infrastructure. Their profitability is positively driven by liquidity, efficiency and leverage. The real estate firms are somewhat less profitable compared to industrial construction firms, and their profitability is positively driven by liquidity. The infrastructure firms have low ROA and ROIC.Originality/valueThe real estate, infrastructure and industrial construction drastically differ from each other. The challenges involved in real estate, infrastructure and industrial construction are altogether different. Therefore, authors present a comparative analysis of the profitability of real estate, infrastructure and industrial construction segments of the construction and compare their determinants of profitability. The results provided in the study are robust and reliable because of the use of a superior econometric model, i.e. Arellano–Bond dynamic panel data estimation with robust estimates, which accounts for heteroscedasticity and endogeneity in the model.

The Impact of Institutional Investment Horizon on Corporate Governance and Firm Performance

The purpose of this research study is to explore the impact of institutional investors in corporate governance and market measure firm performance mechanism. The study defined the investment horizon of the financial institutions on the bases of their long or short term investment objectives in the investee companies. In order to study these relationships the research analyzed an unbalanced panel of 287 non-financial firms’ from 2005 to 2016. The selected sample was analyzed by fixed effect, random effect and Arellano–Bond dynamic panel models. The results of the study confirm the positive impact of institutional investors (as a homogenous group) in enhancing the corporate governance and firms’ performance mechanism in the light of agency and signaling theories. However, when the financial institutions are analyzed on the basis of their investment horizon the empirical results deviated from the previous predicted theoretical findings. The research further concludes that long investment horizon institutional investors play a positive role in improving corporate governance index and Tobin’s Q, however, short investment horizon institutional investors are found detrimental for both the corporate governance and performance mechanism in Pakistani firms. The current study is unique in the context of the emerging economies, as it provides response to the previous contradictory opinions about the role of financial institutions in firm performance and corporate governance mechanism. Moreover, the current research is also useful for individual investors, corporate managers and regulatory authorities for better understanding of this phenomenon.

Impact on Financialisation on Accumulation: Evidence from India

The paper adds to the literature on financialisation with firm‐level evidence from India, an emerging market in the growth phase, when capital accumulation is likely to be important. I use a broader definition of financialisation to add on to the investment function developed by Orhangazi (2008, Cambridge Journal of Economics, 32, 863). Empirically the above specification is tested for two samples of Indian non‐financial firms for the study. The first, Group I, includes firms prominent on the stock market represented by the combined sample of NIFTY non‐financial indices (ninety‐two firms), and the second, Group II, includes a broader group of all non‐financial firms (704 firms). Using the Arellano–Bond dynamic panel model, the paper finds that financialisation has a robust negative impact on capital accumulation. The negative impact of financialisation is reflected in higher financial income for both the samples, underlining a likely trade‐off between income from core activities and real capital accumulation.