Fixed Effects Panel Estimation Research Articles

The impact of ESG profile on Firm's valuation in emerging markets

Environmental, Social and Governance (ESG) factors are a critical input in emerging markets for managing risks, attracting capital, being competitive, and complying with evolving regulations. The firms prioritizing ESG are likely to drive innovation and enhance long-term value creation, making them more resilient in these dynamic markets. Therefore, a plausible link should exist between ESG and firm valuation. In this paper, we attempt to validate this link by evaluating the impact of ESG scores and ESG controversies on Tobin's Q and enterprise value to sales (EV/S). Our assessment is based on a comprehensive sample of non-financial firms across sixteen emerging markets for eleven years. Based on fixed effects panel estimations we demonstrate, in general, a positive relationship between firm value and ESG profiles. The fundamental valuation (Tobin's Q) is influenced by the lagged ESG score, while for the multiplier (EV/S), we find the current ESG score to be relevant. For the RepRisk index, we observe that ESG controversies negatively impact firm value for both fundamental and multiplier proxies. Our findings hold considerable implications for the evolving landscape of ESG compliance, particularly for firms and investors in emerging markets, as well as for the broader financial system.

Odrednice unutarnjih migracija u Hrvatskoj

Migration has had a great impact on Croatia, especially after it joined the EU. Thus, several studies have focused on international migration compared to regional migration which is under investigation. This study sheds some light on the determinants of internal migration at the NUTS3 level in Croatia in the 2000-2019 period relying on a fixed effects panel estimation. The results show that regional migration in Croatia is in line with the stylized facts on migration. The living standard and (labour) productivity measures, along with employment and wages are the main economic drivers of migration inflows and outflows. However, regions with substantial tourism activity attract inflows and disincentivize outflows of people, while regions with a high share of agriculture, forestry, and fisheries in the value-added decrease internal migration inflows. Moreover, environmental protection results also being a significant determinant of regional migration.

International inventor teams and technological variety in multinational enterprises

This study investigates the relationship between international inventor teams and the technological variety of multinational enterprises. We frame this relationship conceptually by considering two possible attributes of diversity in international inventor teams: cultural differences and heterogeneous knowledge. We employ a dataset for 454 multinational enterprises with 71,126 subsidiaries across 185 countries that applied for 139,066 priority patents during the period 2007–2014. Fixed-effects panel estimations indicate that international inventor teams are positively associated with both related and unrelated technological variety at the level of the MNE. Such relationships display diminishing marginal returns, pointing to management and coordination costs reducing the benefits from international inventor teams. In addition, we find that MNEs with higher technological innovation capability deal with the additional complexity from managing and coordinating international inventor teams by consolidating technological variety.

The Impact of Female Education and Employment on Service Sector Value Added Growth: Evidence From Panel Data

The world economy has experienced a considerable shift in structure from the late 1980s, with the service sector contributing approximately 62 percent to the overall economic output and 50 percent of the total employment share from 1991 to 2010. Given the importance of the service sector, we study the inter￾relationship between female education attainment, female employment in the service sector, and the per capita value-added growth of the service sector. Our analysis uses data from 146 countries from 1991 – 2015. Using fixed effects panel estimations, we conclude that globally, an increase in female education significantly primary education attainment increases the growth of the service sector. In contrast, an increase in female employment in the service industry relative to male employment leads to decreased service sector growth. We suggest that the negative effects of female employment on growth are based primarily on discriminatory factors women face in the workplace. Our results are robust across all specifications and hold after correcting for possible endogeneity.

Economic zones and local income inequality: Evidence from Indonesia

Economic zones can be powerful drivers of economic growth in developing countries. However, less is known about their distributional impact on the local society. This paper provides empirical evidence from Indonesian provinces on the relationship between economic zones and within-province income inequality. We apply fixed-effects panel estimation to province-level data for the whole of Indonesia, which we then complement with separate studies on the opening of three economic zones in three provinces using the synthetic control method. The results suggest that the above relationship is positive overall. The estimated rise in income inequality after a zone opens is, however, relatively small on average and may be short-lived. Moreover, the average estimate masks large regional differences, which suggests that the inequality implications of economic zone policies depend on local conditions. One possible explanation for the rise in inequality is that the unskilled population benefits disproportionately less from the policy.

Welfare Effects of Smallholder Export Participation: Evidence from Panel Data in Kyrgyzstan

The involvement of small-scale farmers in markets is crucial to alleviate poverty in low- and middle-income countries. In this study, we examine the determinants and welfare implications of export participation for smallholders in Kyrgyzstan, utilising household-level panel data for the period of 2010-2013 and employing fixed-effects panel estimations. Our research reveals that the decision to participate in exports is primarily influenced by the geographical location of the farmers and their receipt of overseas remittances. Furthermore, we find no significant welfare effects from exporting when assessed using three welfare indicators. Consequently, we conclude that in the absence of organised export value chains, trade liberalisation does not yield clear welfare benefits for small-scale farmers in impoverished countries.

Impact of Basel III liquidity and capital regulations on bank lending and financial stability: Evidence from emerging countries

AbstractWe examine the impact of Basel III's liquidity requirements, such as the liquidity coverage ratio (LCR), net stable funding ratio (NSFR), and capital adequacy, on bank lending and financial stability using data from 688 commercial banks of 10 developing economies from 2014 to 2021 using fixed effects panel estimation. The findings of the study support that bank lending is positively impacted by the regulatory capital and the short‐term liquidity requirement (LCR), but negatively impacted by the NSFR. We find that the bank's Z‐score benefits from achieving the required capital and liquidity requirements. Lending growth and bank stability are nonlinearly impacted by regulations governing bank capital and liquidity. Furthermore, we use the Generalized Methods of Moments‐Quantile Regression (GMM‐QR). Finally, our results indicate that regulators in these developing countries should support adequate capital and liquidity management to lessen adverse economic shocks' impact on banks' intermediation capabilities and stability.

Working time mismatch and job satisfaction – the role of employees’ time autonomy and gender

Evidence shows that working time mismatch, i.e. the difference between actual and desired working hours, is negatively related to employees’ job satisfaction. Using longitudinal data from the German Socio-Economic Panel, we examine the potential moderating effect of working time autonomy on this relation and we also consider the corresponding role of gender. First, individual fixed effects panel estimations reaffirm both the negative link of working hours mismatch and the positive relation of working time autonomy to employees’ job satisfaction. Second, our results show a positive moderating relation of working time autonomy on the link between mismatch and job satisfaction. Third, our analyses hint at gender-specific differences: particularly women seem to benefit from the moderation role of working time autonomy.

Keterbukaan Perdagangan dan Emisi CO2: Studi Empiris Tingkat Provinsi di Indonesia

There are pros and cons to the results of previous studies regarding the relationship between trade openness and the environment, prompts a deeper investigation of the mechanisms of trade in influencing the environment. This study aims to examine the relationship between trade openness and the level of per capita CO 2 emissions in Indonesia during the period 2010-2018, through three mechanisms, namely scale effects, technique effects and composition effects, as well as comparing the results of using two types of trade intensity measures, namely trade share and composite trade share. The analysis was conducted at the provincial level and using the random & fixed effects panel estimation method. The results of the study show that trade openness has a positive relationship with the level of per capita CO 2 emissions in Indonesia, with the scale effect being more dominant than the technique effect. Furthermore, the composition effect caused by the high capital-labour ratio in a region is the main contributor to the increase in emissions compared to the composition effect due to trade activities induced by the comparative advantage between regions which have negative elasticity. Moreover, the composite trade share index is able to explain trade openness more comprehensively than the trade share.

Telecommunication Infrastructure Development and FDI into Asian Developing Nations

This study strives to evaluate the effects of infrastructure availability and development on foreign direct investment (FDI) in host developing nations.Employing fixed effects panel estimation technique, panel data for 23 Asian developing countries, from 1990-2009 is used with heteroscedasticity corrected standard errors. The results reveal a strong favourable impact of telecom infrastructure (measured by mobile subscriptions) in drawing inward FDI. Therefore, it is concluded that a country with improved infrastructure in general and telecom infrastructure in particular is likely to pull in more FDI. Other variables such as market size, economic development, and currency valuation (measured by exchange rate) appear important in captivating multinational investors, as they exhibit significant coefficients. On the contrary, high-inflation significantly deters inward FDI.

Innovation financing in Colombia: An explicative proposal

Data on innovation financing in Colombia present a paradox: Manufacturing companies prefer to finance their innovation projects with their own capital, with bank loans in second place, and cheaper public funding last. Extant financial theories cannot explain such a paradox (reversed pecking order), making a different approach necessary. Hence, a new perspective is presented on the basis of Sierra’s (2014, 2020) proposal. A fixed effects panel estimation is carried out that includes three new variables: A Knowledge Incorporation and Consolidation System, interaction among companies and funders, a particular type of investor (Dedicated). The results support the alternative explanation. Additionally, research possibilities, designs and applications of public and organisational policy aimed to overcome some of the problems mentioned are proposed.

Politics as a determinant of primary school provision: the case of Uruguay

This paper examines the relationship between school provision and the political power of the president in Uruguay between 1914 and 1954. The empirical analysis relies on fixed effects panel estimations based on newly compiled information about the partisan orientation of legislative members, electoral competition and schooling diffusion at the department-level. Ceteris paribus, I find an association between school provision and the need of government to capture votes or to obtain further legislative support. The resource allocation initially benefitted government’s core voter departments and shifted to favor non-loyal districts as an answer to the increasing intra-party political conflicts. Against the traditional historical narrative, the results point out to an influence of political interests on the diffusion of mass schooling and suggest the use of school provision as a pork barrel good over the period.

Reducing vehicle cold start emissions through carbon pricing: evidence from Germany

A large proportion of local pollutants originating from the road transport sector is generated during the so-called cold-start phase of driving, that is, the first few minutes of driving after a car has stood inactive for several hours. Drawing on data from the German Mobility Panel (MOP), this paper analyzes the factors that affect the frequency of cold starts, approximated here by the number of car tours that a household takes over the course of a week. Based on fixed-effects panel estimations, we find a negative and statistically significant effect of fuel prices on the number of tours and, hence, cold starts. Using our estimates to explore the spatial implications arising from fuel price increases stipulated under Germany’s Climate Programme 2030, we find substantial impacts on the number of avoided tours even for modest fuel price increases of 20 cents per liter, particularly in urban areas. This outcome lends support to using carbon pricing as a means to improve both global climate and local air quality, pointing to a co-benefit of climate policy.

Reducing Vehicle Cold Start Emissions through Carbon Pricing: Evidence from Germany

A large proportion of local pollutants originating from the road transport sector is generated during the so-called cold-start phase of driving, that is, the first few minutes of driving after a car has stood inactive for several hours. Drawing on data from the German Mobility Panel (MOP), this paper analyzes the factors that affect the frequency of cold starts, approximated here by the number of car tours that a household takes over the course of a week. Based on fixed-effects panel estimations, we find a negative and statistically significant effect of fuel prices on the number of tours and, hence, cold starts. Using our estimates to explore the spatial implications arising from fuel price increases stipulated under Germany’s Climate Programme 2030, we find substantial impacts on the number of avoided tours even for modest fuel price increases of 20 cents per liter, particularly in urban areas. This outcome lends support to using carbon pricing as a means to improve both global climate and local air quality, pointing to a co-benefit of climate policy.

Working Time Mismatch and Job Satisfaction - the Role of Employees' Time Autonomy and Gender

Evidence shows that working time mismatch, i.e. the difference between actual and desired working hours, is negatively related to employees' job satisfaction. Using longitudinal data from the German Socio-Economic Panel, we examine the potential moderating effect of working time autonomy on this relation and we also consider the corresponding role of gender. First, individual fixed effects panel estimations reaffirm both the negative link of working hours mismatch and the positive relation of working time autonomy to employees' job satisfaction. Second, our results show a positive moderating relation of working time autonomy on the link between mismatch and job satisfaction. Third, our analyses hint at gender-specific differences: particularly women seem to benefit from the moderation role of working time autonomy.

State Capacity and the Soft Budget Constraint: Fiscal Federalism, Indian Style

In this paper, we explore the effects of India’s federal structure on state-level fiscal responsibility. Drawing from a dataset that covers the period from 1991 to 2019, we argue that a low marginal retention rate, a high level of transfer dependence and a high level of borrowing dependence (soft budget constraints) from the central government facilitates lower levels of fiscal responsibility in intergovernmental relations. Our hypothesis is tested using random effects, and fixed effects panel estimations of regressions on fiscal responsibility outcomes across Indian states. We also account for the effects of the world’s largest employment program, the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), on subnational fiscal responsibility. We find that the fulfillment of rural public employment measures is conducive to lower levels of fiscal responsibility. Moreover, we argue for the persistence of soft budget constraints as a key structural feature of Indian federalism.

Antecedents of overtime work: The case of junior academics

Despite the ongoing public debate about precarious working conditions in academia, there is only little evidence on working hours and overtime work for the group of (non-tenured) junior academics. We make use of unique longitudinal survey data on the occupational situation and careers of doctoral students and doctorate holders in science, technology, engineering and mathematics fields in Germany. We find that overtime hours are less pronounced among firm employees holding a doctorate and among postdocs than they are among doctoral students. This result is prevalent both between individuals in the cross-section and with regard to individual fixed effects panel estimations. In contrast to firm employees, overtime hours are in a considerable way positively associated with part-time contracts for doctoral students. Furthermore, our results reveal that individuals’ career orientation is positively associated with extra hours. In contrast, individuals with family responsibilities spend significantly fewer hours at work.

Personnel policy adjustments when apprentice positions are unfilled

PurposeGerman establishments face increasing difficulties in filling their apprentice positions. Thus, firms are less able to train (and later retain) their own skilled workforce. The purpose of this paper is to analyse the firms’ personnel policy adjustments in response to unfilled apprentice positions.Design/methodology/approachTo estimate the within-firm personnel policy adjustments when unfilled apprentice positions arise, fixed effects panel estimations are applied to a large German establishment-level data set, the IAB Establishment Panel (2008–2016).FindingsThe estimates indicate that some firms post slightly more apprentice positions in the period after facing unfilled apprentice positions. Moreover, the results reveal that affected craft establishments in urban regions retain more apprenticeship graduates. Besides of these findings, there are no indications of emphasised personnel policy adjustments.Practical implicationsThe multivariate results do not support the claim that training firms may abstain from apprenticeship training when facing unfilled apprentice positions.Originality/valueThe study shows first evidence of firms’ personnel policy adjustments when apprentice positions remain vacant in Germany, a country with a traditionally high relevance of apprenticeship training.

The Determinants of Capital Structure: Evidence from GCC and UK Real Estate Sectors

Abstract This paper investigates the determinants of capital structure in the context of the Gulf Cooperation Council (GCC) and United Kingdom (UK) real estate sectors. The results of a bivariate analysis indicate that leverage in the UK is much higher than in GCC countries. This may be attributable to UK companies facing a lower cost of debt, which would facilitate their raising of debt capital from the market. In addition, UK real estate firms tend to be larger and have higher levels of tangibility and retained earnings compared with GCC firms, while GCC firms tend to be more profitable and have more growth opportunities. The results of panel and Tobit regression analyses support both trade-off and pecking order theories; for instance, company size was found to have a significant positive impact on different types of debt measurements (market and book debt ratios), which is consistent with the trade-off theory, while profitability and retained earnings to total assets exhibited a significant negative impact for GCC and UK real estate firms, which is consistent with the pecking order theory. Importantly, these results hold true regardless of whether the regressions are estimated using an OLS, random effects, fixed effects panel estimation or a Tobit model.

TEMPORAL AND SPATIAL DEPENDENCE OF INTERREGIONAL RISK SHARING: EVIDENCE FROM RUSSIA

We present an analysis of interregional consumption risk sharing in Russia between 1999 and 2009 using novel estimation methods. In addition to standard fixed-effects panel estimations, we use system and difference GMM estimators to reflect time dynamic properties and possible endogeneity between output and consumption. Furthermore, we apply spatial models that control for spatial dependence across regions. The results show that regional consumption deviations from the national average are highly persistent in time and space. Nevertheless, the regional consumption risk sharing in Russia is relatively high with 70%–90% of idiosyncratic risk being smoothed. Finally, fiscal policy and the degree of financial development appear to contribute to the consumption smoothing.