Dynamic Panel Data Regression Research Articles

Effective corporate income taxation and its effect on capital accumulation: cross-country evidence

Abstract It is debated to what extent corporate taxation discourages capital formation, and the related empirical cross-country evidence is inconclusive. This paper provides new insights into this matter for a large sample of developed and developing countries. In the first step, national accounts data is used to calculate backward-looking effective corporate income tax rates (ECTR) for 77 countries during 1995–2018. In the second step, dynamic panel data regressions are used to estimate the effect of ECTR on aggregate corporate investment. The main findings of this exercise are that (i) statutory corporate income tax rates (SCTR), on average, are twice as high as ECTR, (ii) average ECTR has been relatively stable but show distinct dynamics across countries and (iii) no significant negative relationship exists between ECTR and investment. The latter finding is robust to different specifications and samples and when publicly available SCTR or forward-looking effective tax rate measures are used as alternative tax rate proxies.

Determinants of International Tourist Arrival in Nigeria

This paper examines the effect of economic and non-economic factors on international tourist arrival in Nigeria. Annual data on tourist arrival from 53 countries and explanatory variables from 2010-2016 were analyzed using the dynamic panel data regression technique. Results suggest that travel cost, internet use, political stability and number of hotel rooms are the main determinants of tourist flows. The income of tourist-origin countries outside Africa negatively and significantly affects tourist arrival. Travel cost has a robust negative effect on tourists from within and outside Africa. The number of hotel rooms and urbanization rate positively influence tourist arrival, indicating the importance of tourism infrastructure. Government and policymakers must provide an enabling business environment, infrastructure, and policies to improve the country's global competitiveness.

INSTITUTIONAL ENVIRONMENT AND MARKET STRUCTURE AS DRIVERS OF BANKING INDUSTRY PERFORMANCE

We analyze the effects of market concentration, income diversification, and institutional environment on banking industry performance. We used a sample of 168 countries for the 1994-2019 period and the GMM estimators for dynamic panel data regressions. Our results show that market concentration and diversification have a positive effect on bank performance. The institutional environment, both public-political and private-regulatory, has a negative effect on bank profitability, showing that these financial institutions obtain higher returns in countries with institutional weaknesses. When countries have a high institutional quality, the positive impact of market concentration and income diversification is reversed. Strengthening countries’ institutional quality makes it possible to combine competition between banks and specialization in traditional activities with higher performance. These results are relevant for bank stability and financial policy design, given that the institutional framework includes both direct and indirect channels that affect the general behavior and strategies of banks in the industry.We analyze the effects of market concentration, income diversification, and institutional environment on banking industry performance. We used a sample of 168 countries for the 1994-2019 period and the gmm estimators for dynamic panel data regressions. Our results show that market concentration and diversification have a positive effect on bank performance. The institutional environment, both public-political and private-regulatory, has a negative effect on bank profitability, showing that these financial institutions obtain higher returns in countries with institutional weaknesses. When countries have a high institutional quality, the positive impact of market concentration and income diversification is reversed. Strengthening countries’ institutional quality makes it possible to combine competition between banks and specialization in traditional activities with higher performance. These results are relevant for bank stability and financial policy design, given that the institutional framework includes both direct and indirect channels that affect the general behavior and strategies of banks in the industry.

The impact of explorative and exploitative collaborations on SMEs innovative performance

ABSTRACT Despite the importance of SMEs for innovation activity, questions remain concerning the determinants of their innovative performance and the role of different types of collaboration and partners. The present paper empirically analyzes the role played by different types of R&D collaborations in the persistence of SME innovative performance. We used a longitudinal database to identify all the Swedish SMEs that launched significant product innovations in the ICT market in the 1990–2019 period, in combination with collected data on the R&D collaborations established by these SMEs. Through several dynamic panel data regression models, we point out how SME innovative performance is significantly affected by R&D collaborations with large firms and universities. Crucially, we show how the impact of these collaborations differs depending on the nature of these relationships. In doing so, the present paper offers insights into the relationships between SMEs and universities, and open innovation strategies.

Does ESG disclosure really influence the firm performance? Evidence from India

In this paper, we examine the influence of ESG disclosure scores on firm performance of companies listed in the National Stock Exchange (NSE). The study uses 167 sample firms from 2010 to 2020. We capitalise overall ESG disclosure scores taken as a proxy to measure the effect of sustainability disclosure on firm performance. Further, we consider the return on assets (ROA), return on equity (ROE), Tobin’s Q, and Price Earnings ratio (P/E ratio) as firm performance measures. We employ dynamic panel data regression analysis to examine the influence of ESG disclosures on performance of the firm. In order, to address the endogeneity issues, we apply Generalised Method of Moments (GMM) model. The study results show a positive relationship between ESG disclosure and firm performance. It suggests that companies’ desire to enhance their performance need to pay more attention towards sustainability disclosures.

Integrating choice freedom, economic health, and transportation infrastructure to forecast tourism demand: A case study of Bishnupur and its alignment with sustainable development goals

The relationship between economy, transportation, and tourism has yet to be investigated for small heritage sites. In addition to more research into the elements mentioned above, there is still a need to establish an integrated model that answers the need for economic augmentation in such tourism destinations. The model uses a ‘choice freedom index’ with financial health and transportation infrastructure to forecast positive tourism supply and demand. This article combines ‘economy,’ ‘transportation,’ and ‘tourism’ in a constructed model that employs dynamic panel data regression, econometric modelling, and regression analysis, resulting in a user interface software that identifies future investment requirements to enhance tourism and applies it to Bishnupur, a city in the Indian subcontinent to address the Sustainable Development Goals – promoting economic growth and job creation (Goal 8), increase innovation, promote inclusive and sustainable industrialization, and create resilient infrastructure (Goal 9), sustainable cities (Goal 11), as well as sustainable production and consumption (Goal 12).

Determinants of Indonesia’s Regional Economic Growth During The Era of Regional Autonomy

Economic growth is one measure of the success of a region, as seen by the increasing amount of Gross Regional Domestic Product (GRDP) produced from time to time. The urgency of this study is that the determinants of regional economic growth have not included many exogenous variables in the model, especially non-economic variables. The results for estimating the economic growth model do not reflect the actual conditions of regional economic growth, so strategies for encouraging sustainable regional economic growth cannot be realized. This research aims to know and analyze the determinants of regional economic growth in 34 provinces in Indonesia. The approach used in this study is a quantitative method with static and dynamic panel data regression in the 2015-2022 timeframe. The best way to interpret this study is the two-step system GMM model. The findings of this study conclude that fiscal decentralization, capital expenditure, democracy index, happiness index, and internet access positively impact economic growth. Recommendations for this research include increasing regional self-reliance by exploring tax potential for development, providing space for freedom for the community, increasing people's living standards to make them happier, and encouraging infrastructure development so that investors are willing to invest in growing people's employment opportunities.

DYNAMIC PANEL DATA GENERALIZED METHOD OF MOMENT ARELLANO-BOND APPROACH IN ECONOMETRIC MODEL RETURN ON ASSETS OF PHARMACEUTICAL COMPANIES

The impact of the Covid-19 pandemic has resulted in a significant decline in the pharmaceutical sector's stock price, so investors are hesitant to invest in the pharmaceutical sub-sector. This study aims to apply dynamic panel data regression analysis with the Arellano-Bond Generalized Method of Moment (GMM) approach to model the profitability of pharmaceutical sub-sector companies on the Indonesia stock exchange. Therefore, investors need to know the profitability of the pharmaceutical sub-sector to make an investment decision. This research will produce a profitability model for pharmaceutical sub-sector companies. The data in this study was obtained from observations of stock price movements of pharmaceutical sub-sector companies listed on the Indonesia Stock Exchange (IDX) in 2013-2022. From the resulting model, it is hoped that it can provide an overview for investors to take action to invest in shares of the pharmaceutical sub-sector. The study results show that the model meets the consistency of parameters based on the results of the Arellano-Bond test and valid instruments based on the results of the Sargan test. The t-test results show that the previous period's ROA has a positive and significant influence on ROA, CR has a negative and significant influence on ROA, DR has no significant effect on ROA, and inflation has a positive and significant effect on ROA. So, the variables that significantly affect ROA are the ROA of the previous period, CR, and inflation. Based on the study's results, investors must choose companies with a higher ROA value compared to the ROA of the previous year. And choose a company that has a low CR value.

Impact of Hedge on the Firm Value of Consumer Cyclicals Companies Listed in the Indonesian Stock Exchange

One indicator that shows how effective and efficient a company is in achieving its goals is its financial performance. Maintaining and improving financial performance is mandatory for a company to continue to exist and attract investors. This financial information functions as a means of information, a tool for management accountability to business owners, a representation of company success indicators, and consideration for decision making. Tobin's Q is an indicator that can be used to measure a company's financial performance from an investment perspective. The aim of this research is to find out the conditions and determinant factors in analyzing financial performance in consumer cyclical companies for the 2015-2022 period. The research method uses dynamic panel data regression with the Arellano-Bond Generalized Method of Moment (GMM) approach on 24 consumer cyclical sector companies from 2015 to 2022 listed on the BEI. The research results show that partially the company value in the previous period (Tobin’s Q(-1)) has a significant positive effect and can be backward looking towards achieving high and sustainable company value (Tobin’s Q) in the next period. Profitability (ROA) has a significant positive effect on company value (Tobin’s Q). This shows the company's prospects for sustainability in the future.

Exploring the impact of working capital in the U.S. aviation industry for profitability and shareholder value

This study examines how working capital impacts profitability, shareholder value, and the relationship between COVID-19 and airline size for the top ten U.S. commercial airlines from 2010 to 2021. Working capital is the short-financing indicator crucial for airline management facing economic uncertainty. This research applied dynamic panel data regression using the Hausmann-Taylor panel regression and the general method of moments to avoid heteroskedasticity, endogeneity, and unbiasedness. The cash conversion cycle, the current ratio, the quick ratio, and working capital are explanatory variables. Revenue growth rates, earnings-per-share, and return-on-assets are the explained variables for profitability and shareholder values. The authors find that the previous year's activities, days in inventory (DII), days-sales-outstanding (DSO), and COVID-19 as dummy variables impact profitability and shareholder value. The DII, DSO, and days-payable-outstanding of the large airline companies are more prominent than those of small airlines. The value of this study is that it is the first to explore working capital and its impact on profitability and shareholder with its determinants in the airline service industry, including the pandemic period.

Related and unrelated variety and convergence to technological frontier: empirical evidence for Polish regions

ABSTRACT This paper examines the effects of related and unrelated variety on total factor productivity (TFP) in Poland. Based on dynamic panel data regression results for Polish regions in 2003-2019, we find the positive effect of related variety and the strong negative effect of unrelated variety on TFP. This implies that regions with high related and low unrelated variety optimize TFP. Using the estimated TFP values, we tested for TFP convergence to the technological frontier using convergence tests that take into account significant differences in technological advancement across regions. We reject TFP convergence for all regions, but we find evidence of regional club convergence. The results of the convergence tests obtained for the simulation variants indicate that changes in related and unrelated variety structures may lead to the formation of convergence clubs with the regional technological leader. Furthermore, the changes primarily in related variety structures lead to the convergence of some regions to the regional technological frontier.

The impact of FinTech firms on bank performance: evidence from the UK

PurposeThis study examines the impact of financial technology (FinTech) on bank performance employing data from the United Kingdom (UK) banking sector for a period spanning from 2010 to 2019.Design/methodology/approachThis study employs static as well as dynamic panel data regression analysis to assess the impact of FinTech on the profitability of UK banks.FindingsThe results show that FinTech firms positively impact bank performance. For every new FinTech firm introduced into the UK market, net interest margin (NIM) and yield on earning assets (YEA) increase by 6.385 and 3.192% of their sample means, respectively.Practical implicationsCooperating with FinTech firms, UK banks can broaden their portfolio of financial services offered to their customers and optimize their profit margins.Originality/valueThis is the first study that examines the impact of FinTech on bank profitability employing data from a developed market.

Monetary policy transmission in India under the base rate and MCLR regimes: a comparative study

The paper estimates the degree of pass-through of monetary policy to bank lending rates under both the base rate and the marginal cost of funds-based lending rate (MCLR) regimes using dynamic panel data regression. Using nine different models for nine individual bank-specific variables, the study estimates that a 100 basis point increase in the policy rate leads to an increase in the weighted average lending rate on fresh rupee loans sanctioned by banks over the long run by 26–47 basis point-depending on the model specification- during the MCLR regime as against 11–19 basis point during the base rate regime. Hence, irrespective of the model chosen, transmission is higher during the MCLR regime than base rate regime. The alignment of liquidity management with the monetary policy stance, the introduction of the flexible inflation targeting (FIT) framework and the deceleration in economic activity reducing credit demand could be contributory factors for better transmission during the MCLR regime.

Determinants of Buffer Capital for Banks in India

This study has examined the impact of bank-specific indicators on the buffer capital of banks in India. The impact of key variables return on assets, credit deposit ratio, return on equity and the ratio of non-performing loans to total loans on buffer capital has been examined for banks in India. Using dynamic panel data regression, the results reveal that non-performing loans to total loans, return on assets and return on equity have a positive impact on buffer capital. It is revealed that the banks keep extra capital cushion with an increase in risk elements. Also, the credit deposit ratio is having a negative but significant impact on buffer capital. The results further reveal persistency in buffer capital across all models. The role of the cost of capital in the determination of buffer capital has also been examined. The results can be used by bank policymakers in the formulation of various reformation packages.

Labour reallocation and unemployment fluctuations: A tale of two tails

AbstractThis paper examines the sectoral shifts hypothesis for the US regional labour market using a quantile panel framework. We use a monthly panel dataset that spans over 1990–2016 for the 48 US states and employ a dynamic quantile panel data regression approach to investigate the asymmetric nature of the relationship between sectoral labour reallocation and unemployment fluctuations. The empirical evidence suggests that the impact of the employment dispersion index is relatively small and insignificant for lower levels of unemployment but becomes positive and highly significant for higher rates. Our findings bear out the asymmetry of reallocation disturbances for the US labour market.

Do the macro and global economic factors drive the nonperforming loans in GCC economies?

Purpose The current study aims to investigate the determinants of nonperforming loans (NPLs) in the GCC economies during the period spanning 2000 to 2018. It also examines whether the worldwide financial crisis of 2007–2008, which brought the issue of non–performing loans to the greater attention of academics and policymakers, had a substantial impact on NPLs in this region. Design/methodology/approach The sample consists of 53 conventional banks from GCC countries, and the basic data for the study is obtained from various sources such as Bankscope, IMF World Economic Outlook, World Bank and Chicago Board of Options Exchange Market Volatility Index. The estimations were done by dynamic panel data regression modeling using system generalized methods of moments. Findings The findings reveal that both, the non-oil real GDP growth rate and inflation have favorable effects on NPLs. On the other hand, domestic credit to the private sector and the volatility index have an adverse effect on NPLs. Furthermore, the period-wise analysis shows that the relevance and significance of the determinants of NPLs vary between the precrisis and postcrisis periods. It is also reflected through the intercept dummy, which is found to be significant, indicating that the financial crisis, as a global economic factor, had a significant impact on NPLs. A number of robustness tests are applied, which indicate that the results are mostly robust and consistent in terms of the significance of the explanatory variables and the direction of their relationship with the dependent variable. Practical implications Policymakers and bank authorities must strive to maintain a healthy economy and implement macroprudential policies to improve the financial stability of banks and reduce credit risk. Originality/value To the best of the authors’ knowledge, this is likely the first study that empirically investigates the influence of the financial crisis on NPLs in the context of GCC economies. In addition, the research spans 19 years to produce more conclusive results.

Political determinants of health: (re) examining the role of governance in reducing maternal mortality.

Given change in the universal developmental agenda and the quality of governance in the last two decades, this paper re-examines the relationship between governance, health expenditure and maternal mortality using panel data for 184 countries from 1996 to 2019. By employing the 'dynamic panel data regression model', the study reveals that a one-point improvement in the governance index decreases maternal mortality by 10-21%. We also find that good governance can better translate health expenditure into improved maternal health outcomes through effective allocation and equitable distribution of available resources. These results are robust to alternative instruments, alternative dependent variables (such as infant mortality rate and life expectancy), estimation by different governance dimensions and at the sub-national level. Additional findings using 'Quantile regression' estimates show that the quality of governance matters more than the health expenditure in countries with a higher level of maternal mortality. While the 'Path regression' analysis exhibits the specific direct and indirect mechanisms through which the causal inference operates between governance and maternal mortality.

The relationship between leisure-time physical activity and job satisfaction: A dynamic panel data approach.

Previous research has documented a positive effect of leisure-time physical activity (LTPA) on life satisfaction. The relationship between physical activity and the specific domain of job satisfaction is, however, relatively unknown. This study aims to investigate the effects of different frequency levels of LTPA on self-reported job satisfaction and specifically focuses on the two mechanisms of health and recovery from work stress. Using data from the German Socio-Economic Panel (2001-2019), fixed effects and dynamic panel data regression models are estimated to address the problems of unobserved heterogeneity and reverse causality. A mediation and sub-sample analysis shed light on the role of health and work stress. The results reveal that weekly LTPA has a positive effect on job satisfaction and that health represents a channel yielding those benefits. The effect appears to be moderated by work stress. Further, the analysis reveals the importance of considering unobserved heterogeneity and reverse causality when studying this relationship. The findings indicate a positive relationship between regular LTPA and job satisfaction and add plausible causal evidence to the limited literature in this context. The findings yield implications for employers and employees.

Determinants of economic growth regencies/cities in Jambi Province with dynamic panel data approach

This study aims to analyze the determinants of economic growth Regency/City in Jambi Province. The factors considered to be the determinants of economic growth are lagged economic growth, government expenditure, household consumption, labor, and infrastructure. This study used time series data from 2011-2020 and cross-section 11 regencies/cities in Jambi province. The analysis tool used in this study is dynamic panel data regression. The results of the dynamic panel data regression show the generalized system method of the moment model as the best model. Based on the analysis results, lagged economic growth had a significant positive effect. In the short term, labor had a significant negative effect, and infrastructure had a significant positive effect. In contrast, government expenditure and household consumption did not significantly affect economic growth. In the long run, infrastructure has a significant positive effect, while government expenditure, labor, and home consumption have no significant effect on economic growth.

Election cycles and corruption perception in Africa

AbstractThis paper empirically examines whether Africa’s low corruption agenda can be achieved amid election cycles. We employ country-level data from 36 African countries covering the period 1998–2020. Using fixed effects, random effects and dynamic panel data regressions, our results suggest that in election years, increment in government expenditure is associated with higher corruption perception while increment in real GDP growth lowers corruption perception than in non-election years. On regional differences, the effect of election cycles on corruption perception was found to be greater in southern part of Africa than the rest of the sub-regions. These findings may have important implications for policy.