Fixed-effects Regression Research Articles

An augmented Environmental Kuznets Curve and a new measure of water pollution: an investigation of water pollution in Africa

Water pollution constitutes an increasingly urgent problem worldwide. This is particularly true for the African continent, which is experiencing high and increasing levels of water pollution. The continent holds great economic growth potential, making it imperative to understand the economic drivers of water pollution to ensure that African countries develop without degrading water quality. This study examines how countries’ income level, trade, and institutional quality affect water pollution across 42 African countries from 2002 to 2016, using newly estimated data on water pollution from the WorldQual model. An augmented Environmental Kuznets Curve (EKC) is employed using static and dynamic panel estimation techniques, specifically cross-section ordinary least squares and fixed effects regressions, and the system generalised method of moments. The static analysis reveals that economic growth initially increases pollution until reaching a turning point between 6244 and 8974 USD of Gross Domestic Product (GDP) per capita, after which pollution levels decrease. Yet, the dynamic analysis suggests the relationship between GDP and pollution is insignificant. Further, the study uncovers that the impact of institutional quality on water pollution depends on the level of trade. Specifically, at high levels of trade, higher institutional quality is associated with less water pollution, while at low levels of trade, higher in institutional quality is associated with more pollution. This study highlights the complex interplay of economic and institutional factors that must be navigated to effectively address the challenge of water pollution in Africa.

Exploring the Mediated-Moderated Impact in ESG-Value Nexus: The role of Cost of Debt and Firm Size in Chinese Listed Companies

Background: ESG disclosures are critical aspects of corporate reporting, reflecting an entity’s commitment towards sustainable and responsible business practices. In China, the increasing emphasis on the ESG practices tends to raise questions regarding their effect on the financial performance, specifically in case of the listed companies. Purpose: The study aims to investigate the influence of ESG disclosures and Firm Value of the Chinese listed companies, directly, as well as through the mediating effect of cost of debt and size’s moderating role. Design: The study employs a fixed-effects regression for a panel dataset, consisting of 1065 observations, developed using 213 entities and 5 fiscal years (2018 to 2022). The independent variables of the study are the individual ESG components and the aggregate ESG score while Tobin’s Q is the dependent variable. The control variables include leverage, profitability, growth, age, and liquidity. The cost of debt and size has been proxied by the interest costs and natural log of total assets respectively. Results: ESG metrics, individually or collectively, do not influence Tobin’s Q whereas the interaction effect of the size tends to influence the value negatively, only in case of the total ESG score. It states that the positive effect on market value declines as the size of the company increases. The cost of debt, on the other hand, is a significant mediator in the interaction aspect, adversely influencing Tobin’s Q. Policy Implications: The policy makers must support the smaller companies in their ESG adoption as they are more likely to benefit from the ESG practices due to their increase in the market valuation. Additionally, tailored ESG reporting as well as implementation strategies tend to maximise the financial benefits across different firm sizes. Originality/Value: The novel insights provided by the study into the complicated dynamics of the ESG and Value in case of the Chinese companies highlights varied effects. The role of firm size and the importance of cost of debt are prominent in contributing to a broader understanding of the ESG’s role in enhancing value of the enterprises.

Answering the call to action: an empirical analysis of SDG performance in global banks

Purpose Following Agenda 2030, the integration of Sustainable Development Goals (SDGs) into banking strategies has become essential for promoting global sustainability and responsible financial practices. This study aims to examine how the financial characteristics of banks influence their efforts towards achieving the SDGs. Design/methodology/approach A fixed-effect panel regression is used to analyse a sample of 646 publicly listed banks across 61 countries, observed from 2018 to 2023. The data are sourced from the Refinitiv Eikon database, with the dependent variable pertaining to the SDGs calculated as a composite score. Findings Empirical results show that larger and less profitable banks reach better performance in terms of contribution to the SDGs. Instead, the level of leverage does not appear to be a significant influential factor in fostering the support of the SDGs. Originality/value Theoretically, this work enriches the academic literature on SDG performance and confirms the relevance of stakeholder theory. Managerially, this study provides valuable insights for banks integrating the SDGs into their business models and for policymakers identifying strategies to encourage sustainable practices.

The Impact of Tornadoes and Damaging Winds on County-Level Income Growth in the United States

AbstractThis study investigated the economic impact of tornadoes and damaging winds on county-level income growth in the United States from 1969 to 2023. Using a fixed effect regression methodology, the analysis showed that an average damaging storm and an average tornado reduced income growth in the affected counties by 0.16–0.23% and 0.21–0.23%, respectively, translating into a one-time growth loss of approximately USD 5.6 million and USD 6.3 million. The findings also indicate that tornadoes have a 20% greater economic impact than damaging winds. This study underscored the unique challenges posed by tornadoes and damaging winds, which are characterized by their unpredictable nature and concentrated but extreme damage.

Green Transformation and Enterprise OFDI

Clarifying the impact effect and mechanism of green transformation on enterprises' OFDI helps to promote the upgrading of national industrial structure, the high-quality development of the regional economy, and the improvement of enterprises' market economic power, and plays a positive role in China's active integration into the world economy and the promotion of the road of reform and opening up. Based on the data of listed enterprises in the Cathay Pacific CSMAR database from 2005 to 2022 and the data on green transformation of each prefecture-level city, we constructed a fixed-effects regression analysis model to explore the impact effect of green transformation on enterprises' outward foreign direct investment. It is found that (1) green transformation has a significant promotion effect on enterprises' OFDI. (2) The conclusion still holds after conducting robustness tests. (3) Green transition promotes OFDI through green market development, green technological innovation, and alleviation of financing constraints. (4) Government green subsidies and openness to the outside world positively regulate the promotion effect of green transition on OFDI. (5) Green transformation has a stronger role in promoting OFDI from eastern and state-owned enterprises. This paper provides a micro-basis for promoting OFDI by relying on the policy background of green transition, which is an important revelation for improving the quality of green economy and realizing a high level of open economy.

Do new participatory rights attract more party members? Evidence from Germany

Political parties in advanced democracies have slowly but steadily lost members over the last decades. In response to such decline, a common argument is that parties aim to revitalize their internal life by introducing new participatory mechanisms for rank-and-file members. Introducing party primaries or party plebiscites should increase the attractiveness of membership and thus attract new members in aggregate. Although this argument is commonly present in the literature, we need a systematic empirical comparison. To test this argument, this article exploits the federal structure of German political parties and the different timing in introducing new participatory rights. The results of a series of fixed effects regressions, using data from the CDU/CSU and SPD between 1980 and 2020, find that new primaries have an essentially null influence on membership levels while plebiscites appear to reduce the number of members leaving the party.

Do stock prices deviate from their fundamental values during and after COVID-19? Evidence from Fintech firms

Purpose This study aims at investigating the nexus between stock misvaluation, Fintech and COVID-19 via identifying the firm-level misvaluation of Fintech firms, and additionally examining how the COVID-19 pandemic has affected this misvaluation. This study further examines how the level of stock misvaluation has changed after the COVID-19 pandemic to shed more light on the pricing behavior of Fintech in a post-pandemic world. Design/methodology/approach The sample consists of all Fintech firms listed in the STOXX Global Fintech Index over the period (2014–2023). To empirically identify stock misvaluation, the authors apply the widely used approach of Rhodes-Kroph et al. (2005). Then, a series of fixed-effects regressions is conducted to investigate the impact of the COVID-19 pandemic on mispricing. Findings This study finds compelling evidence that Fintech stocks tend to be particularly mispriced during the COVID-19 pandemic. This evidence suggests that investors became more attracted to Fintech stocks, as being exposed to widespread adoption, usage and investment worldwide during the pandemic. Interestingly, the findings show that Fintech firms remain overvalued, even after the pandemic, which indicates that investors maintain their positive expectations for Fintech firms after the COVID-19 pandemic. Practical implications For investors and fund managers, the observed high valuation in the Fintech sector highlights its noticeable growth in the financial industry. The results also suggest that the impact of the COVID-19 pandemic on pricing behavior is asymmetric across the undervalued and overvalued Fintech stocks. This finding provides important insights for portfolio construction and investment strategies during the hard times of pandemics. Originality/value No previous work has been done on the effects of the COVID-19 pandemic on the prevailing levels of mispricing in Fintech stocks. Moreover, the findings provide novel insights into the pricing efficiency in the context of Fintech and extend the understanding of the long-term effects on Fintech firms in a post-pandemic world.

Can farmers' digital literacy improve income? Empirical evidence from China.

This paper explore the impacts and mechanisms of digital literacy of farm households on income. The baseline regression of the impact of digital literacy of farm households on household income uses a fixed effects regression model, and the 2SLS regression model is used to address the endogeneity problem present in the model. The findings reveal that improving digital literacy among rural households significantly increases their family income, a result that remains robust even after considering endogeneity issues. Further examination of the mechanisms shows that enhancing digital literacy among rural households significantly improves their information acquisition capabilities and cognitive skills. It also deepens financial services, boosting the usage and engagement of rural households in digital financial activities, thereby enhancing family income levels. Facilitating rural residents' access to digital skills and tools to ride the digital economic wave, ensuring fair access, and achieving sustainable family income are of paramount significance for rural revitalization. It is also a crucial step in bridging the digital divide and promoting shared prosperity.

The Effect of Liquidity Management on the Viability of Microfinance Institutions of Ethiopia

Purpose: Micro finance institutions have a great contribution to the development of every country’s economy through strengthening society's financial requirements. The institutions need to have adequate liquidity to generate sustainable profit. The main intention of the paper was to investigate liquidity’s impact on Micro finance institutions’ profitability. Research Methodology: Ten years of secondary data were used from 12 Microfinance institutions and fixed effect regression analysis by the use of E-views version 7 software. Return on assets used as the proxy of profitability to evaluate the financial healthiness of MFIs. Results: This study found that the deposit loan ratio has a significant and negative impact on profitability statistically. Whereas, the debt to equity ratio shows a negative signal on Micro finance Institutions (MFIs) profitability but statistically insignificant. The impact regarding size and deposit asset ratios was positive and significant on MFIs’ profitability of Ethiopia. Limitations: Lack of empirical study on the topic was the basic constraint of the study. Contribution: The study concentrated on the financial institutions specifically on microfinance firms. This study helps the institution’s management to give appropriate considerations for each component to preserve an optimal level of liquidity and sustainable profit.

The impact of credit ratings on international investment: Evidence from an emerging market

This study examines the influence of sovereign credit ratings on international investments in emerging markets, focusing on Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI). Using data from 22 emerging economies spanning 1999 to 2019, we employ OLS and fixed-effects regression models to analyze how credit ratings affect investment flows and market volatility. The findings indicate that sovereign credit ratings significantly impact investor decisions, as these ratings serve as a key metric in assessing investment risk and potential. This research highlights the essential role of credit ratings in enhancing financial stability and promoting economic integration through foreign investments, with implications for growth and trade. The study provides novel insights for investors, policymakers, and rating agencies on the role of credit ratings in emerging market investments, contributing to a deeper understanding of their impact on global economic dynamics.

Entrepreneurial orientation, board tenure and the financial performance of hospitality firms

This study examines how internal governance influences the relationship between strategic posture and firm performance in large, publicly listed U.S. hospitality firms. Drawing on Agency Theory, we argue that the board of directors plays a crucial role in determining whether firms can capitalize on the top management team’s entrepreneurial orientation (EO). We investigate board tenure as a key characteristic representing the balance between accumulated expertise and potential entrenchment. Using two-way fixed effects regressions on longitudinal data, we find a significant positive association between EO and firm performance. However, board tenure moderates this relationship, with a dampening effect that increasingly restricts returns to EO as tenure lengthens. Our results suggest that governance risks become more salient with extended board tenure. These findings offer important insights for optimizing board configurations in the dynamic hospitality industry.

A Study of The Effect of Stock Liquidity on Enterprise Risk-Taking Level

Stock liquidity, as one of the important market characteristics of enterprises, not only affects the financing of listed enterprises, but also affects the risk decision of enterprise management, which in turn affects enterprise risk-taking level. In order to deeply explore the impact of stock liquidity on enterprise risk-taking level, this paper selects all the data of Shanghai and Shenzhen A-share listed companies from 2000 to 2023 in the Cathay Pacific CSMAR database as samples, and eliminates data from financial sector firms, and from companies designated as ST or ST*. Additionally, it excludes any instances where key financial metrics are incomplete or absent.After that, we carry out the descriptive statistics and correlation analysis of the samples, and conduct a analysis of the impact of stock liquidity on enterprise risk-taking level. Meanwhile, descriptive statistics and correlation analysis are carried out on the samples, and a two-way fixed-effects model regression is conducted around the impact of stock liquidity on enterprise risk-taking level, and lagged one period method, replacing the explained variables method and instrumental variables method are chosen to conduct the robustness test. Finally, it is concluded that stock liquidity is significantly positively correlated with enterprise risk-taking level, but there is no difference between the level of significance of the state-owned enterprises and that of the non-state-owned enterprises.And the conclusions obtained are robust.

A Longitudinal Examination of Autism Services, Child Adaptive Functioning, and Parent Quality of Life during the COVID-19 Pandemic.

The delivery of services to children with autism spectrum disorder (ASD) was disrupted during the coronavirus disease 2019 (COVID-19) pandemic, which may have affected child functioning and caregiver quality of life (QoL). This study examined changes in service intensity, child adaptive functioning, and caregiver QoL during the COVID-19 pandemic. Participants were 146 caregivers (87% mothers) of children with ASD (M age = 8.22 years; SD = 4.21) who were invited to complete an online survey about service intensity, child functioning, and caregiver QoL at four time points between the summer of 2020 and the summer of 2021. Simple regressions indicated that child adaptive functioning and caregiver QoL increased over time after stay-at-home orders were lifted. Fixed effects regression models indicated that increases in service intensity were associated with concurrent increases in caregiver physical QoL. Decreases in child repetitive behaviors were associated with concurrent increases in caregiver social and environmental QoL. These findings suggest that children and their caregivers demonstrated resilience in the year after stay-at-home orders were lifted. Additionally,service intensity and child repetitive behaviors may impact caregiver QoL, making these variables areas of opportunity for stakeholders and professionals.

Care Labor and Family Income Inequality: How Childcare Costs Exacerbate Inequality among U.S. Families

Care infrastructures are essential for supporting families and enabling women’s participation in the labor market, but they also have implications for family income inequality. This article examines access to childcare services in the United States as a case study. We propose that market-priced childcare systems generate inequalities in how births affect mothers’ contributions to family income, because they constrain post-birth labor supply for lower-income women more than for higher-income women, and aggravate family income inequality as a result. Using the Survey of Income and Program Participation (SIPP) merged with state-level childcare prices, we estimate individual fixed-effects regression models for the consequences of births on family income and its proximate determinants: mothers’ labor supply and earnings, and partners’ labor supply and earnings. We find that childcare prices increase post-birth earnings losses for mothers without college degrees, but not for mothers with college degrees, and these losses are not compensated for by increases in partners’ earnings or by income transfers. As a result, childcare costs exacerbate family income gaps between partnered women with and without a college degree by 34 percentage points.

Digital financial inclusion, e-commerce development and entrepreneurial activity

While digital transformation has revolutionized financial services and commerce globally, the complex interplay between digital financial inclusion (DFI), e-commerce development, and entrepreneurial activity remains understudied, particularly in emerging economies. Prior research has largely focused on isolated effects of either digital finance or e-commerce on economic outcomes, overlooking their potential synergistic impact on new business creation. This study investigates how DFI influences entrepreneurial activity through e-commerce development in China, using panel data from 275 prefecture-level cities (2011−2021). Employing fixed-effects regression models and instrumental variable approaches, we find that DFI significantly enhances entrepreneurial activity, with stronger effects in non-central and non-provincial capital cities. The impact varies regionally: DFI's influence is most pronounced in Eastern China, where it works synergistically with human capital and trade openness, while in Central and Western regions, its effectiveness depends more on GDP and infrastructure development. Our findings demonstrate that e-commerce partially mediates DFI's impact on entrepreneurship, suggesting that digital financial services catalyze new business creation both directly and by fostering e-commerce development. These results provide novel insights for policymakers seeking to leverage digital transformation for inclusive economic growth, highlighting the importance of tailoring digital financial initiatives to regional economic contexts.

Environmental sustainability performance of US airlines: implications of financial performance and technical efficiency

Air transportation significantly contributes to global CO2 emissions. The US Aviation Climate Action Plan introduced in November 2021 aims to decarbonize the aviation sector by 2050. Aligned with this initiative, our study applies Data Envelopment Analysis and fixed-effect panel regression to empirically explore how financial performance and technical efficiency impact Environmental Sustainability Performance (ESP) in the airline industry. We curated panel data of nine US passenger airlines from 2010 to 2019 to examine three key areas: the impact of financial performance on environmental sustainability performance, the influence of efficiency on environmental sustainability performance, and the relationship between flight stage length and environmental sustainability performance. Our findings indicate that improved Financial Performance, higher technical efficiency, and longer stage lengths positively contribute to enhanced environmental sustainability performance. Our study provides valuable insights for managers and policymakers, emphasizing the pivotal role of financial stability in achieving environmental goals within the airline industry. It underscores the intricate connection between economic viability and sustainability, offering guidance for policymakers seeking to balance financial success with environmental goals.

Shot selection and managerial efficiency in the NBA

PurposeWe introduce a novel type of basketball shot chart, a true shot chart, that incorporates total points, accounting for both field goals and free throws, corresponding to each shot taken. We then create a shot selection measure called shot selection efficiency that summarizes the efficiency of a team’s shot chart. Lastly, we validate the measure using fixed effects regression analysis and determine whether shot selection is priced efficiently in the NBA player labor market.Design/methodology/approachWe utilize fixed effects regression analysis to validate a measure and also to determine managerial payroll efficiency in the NBA.FindingsWe find that shot selection efficiency is a source of wins not fully explained by team payroll. That is, it is not fully priced into the player labor market.Research limitations/implicationsTeams are in need of the shot chart summary measure provided, as they are not efficiently pricing players in the player labor market with respect to shot selection.Originality/valueThis research introduces a novel shot chart type for basketball as well as a novel shot chart summary measure. It also validates the measure and establishes an NBA player labor market inefficiency related to the measure.

Intelligent manufacturing and corporate green transformation

The rapid evolution of intelligent manufacturing technologies presents opportunities and challenges for corporate environmental sustainability. Although these advancements offer potentially improved efficiency and reduced environmental impact, their actual effect on firms' green transformation remains understudied, particularly in the Chinese market. Hence, this research fills this gap by focusing on the mediating roles of financing constraints and knowledge diversification. Utilizing a comprehensive dataset of 18,390 firm-year observations from Chinese A-share listed companies between 2007 and 2022, we employ fixed-effects regression models and mediation analyses to examine these relationships. Our findings reveal a notable positive impact of intelligent manufacturing on green transformation, partially mediated by reduced financing constraints and increased knowledge diversification. Furthermore, we uncover important heterogeneities across firm lifecycle stages and ownership structures, with mature firms and state-owned enterprises benefiting more from intelligent manufacturing in their green transformation efforts. These results contribute to the growing literature on sustainable Industry 4.0 and offer valuable insights for policymakers and corporate leaders seeking to leverage technological advancements for environmental sustainability.

Governance and information technology for female labour force participation in the African Continental Free Trade Area

The motivation of the present study is to complement the extant literature by assessing the relevance of governance and information technology in how African trade affects female labour force participation. The study focuses on 48 African countries using data for the period 1996–2021. An adopted empirical strategy is the fixed effects regressions that are designed to address concerns for simultaneity and the unobserved heterogeneity. The fractional probit model based on the pooled Bernoulli quasi-maximum likelihood method is also employed. The following main findings are established. First, governance moderates intra-African trade to engender positive synergies on female labour force participation. The positive synergies are apparent from the overall quality of institutions, government effectiveness and the rule of law. Second, information technology does not significantly moderate intra-African trade to affect female labour force participation. The established findings from fixed effects regressions are robust to fractional probit model estimations. The findings are relevant in informing policy makers on how governance can be used to moderate the influence of African trade in promoting female labour force participation. Policy implications are discussed.

Many hurdles to take: Explaining peacekeepers’ ability to engage in human rights activities

Human rights are a fundamental principle and purpose of the United Nations (UN). Yet, UN peacekeeping operations (PKOs) exhibit substantial variation in their ability to engage in human rights activities. While existing research has investigated deployment and mandates, we explain what peacekeepers can actually do on the ground. We argue that the UN Security Council’s permanent member states (the P5) limit human rights mandates if they have private interests in PKO host countries, thereby diminishing peacekeepers’ ability to promote and protect human rights. Moreover, armed conflict shifts priorities away from human rights activities. We use novel data on 21 human rights activities in African countries (1991–2016) and item response models to capture PKOs’ latent ability to engage in these activities. Random and fixed effects regression and mediation analyses with sensitivity tests support our expectations. We find that the P5’s economic interests in the PKO host country negatively correlate with the strength of human rights mandate provisions, which in turn negatively correlates with PKOs’ ability to engage in human rights activities. We find similar, although less consistent, correlations for P5’s security interests. Yet, while mandates partly define the scope of PKOs’ activities, field-level conditions also have an influence. Specifically, ongoing armed conflict negatively correlates with PKOs’ ability to engage in human rights activities. Our results suggest that rising challenges to the liberal international order by powerful states, coupled with the more frequent deployment of PKOs in conflict zones, will likely increase the hurdles that UN PKOs need to overcome to meet expectations regarding their human rights engagement.