Generalized Method Of Moments Research Articles

From death to birth: Do logistics parks help local renewals in logistics industry?

In the era of E-commerce and globalization, the logistics industry has become a new driving force for local economic development, with government-led logistics parks planned and constructed as a powerful policy instrument. Skeptical about whether logistics parks really take effect as expected, this paper investigates the local process of creative destruction in the logistics industry, focusing on how government-led logistics parks bridge between firm exit and firm entry during industrial renewal. Using firm-level data of third-party logistics firms in China from 2003 to 2021 and adopting system GMM estimator method, we verify that previous exit contributes to future entry but varies by the firm type and the city's importance in the regional transport network. Furthermore, we find two major roles of government-led logistics parks: (1) accelerating this process by providing the platform where various resources can be reused and reorganized into high-quality new logistics firms; and (2) prioritizing the rebirths from local existing firms over arrivals from other cities, though with some level of local protectionism. Government policies and planning decisions should maintain such function without inhibiting regional market integration.

Are government budgets a visible stabilizer? Evidence from China since the tax-assignment reform

PurposeThis study quantitatively examines the relationship between economic fluctuations and government budget size in the context of China’s fiscal decentralization, drawing inspiration from theoretical predictions of the Keynesian view and empirical studies on other economies.Design/methodology/approachThe panel comprises 31 provinces or equivalents in mainland China, spanning from 1994 to 2019. Diverse estimation strategies including two-way fixed effect regression, the generalized method of moments (GMM) and threshold regressions are, utilized.FindingsThe results suggest that under the “tax-assignment system”, neither the central government’s fiscal transfers nor the provincial budgetary revenues or expenditures help reduce economic volatility. Surprisingly, some regression outcomes suggest that government size measures destabilize business cycles.Originality/valueWhile the study does not provide supportive evidence for the stabilizing effect of public budgets in Chinese provinces, it promotes a rethinking of the government’s intricate role in macroeconomic stabilization in the context of China’s fiscal decentralization.

Influence of key ESG factors on Islamic banks’ financial performance: Evidence from GCC countries

With the global emphasis on sustainability, this research highlights the crucial role Islamic banks can play in sustainable development. The study evaluates how Environmental, Social, and Governance (ESG) practices impact the performance of Islamic banks in GCC countries from 2010 to 2021 using the generalized method of moments (GMM) approach to address potential endogeneity in panel data. Our findings show that while the overall ESG score does not significantly impact bank performance, individual ESG components do. The social component positively affects several performance indicators, governance impacts Return on Equity (ROE), and the environmental factor correlates positively with Tobin's Q. Despite the growing focus on ESG principles, their integration in Islamic banking is limited. By improving ESG performance and offering niche market services, Islamic banks can significantly contribute to sustainability. The study advises bank executives, investors, and policymakers to integrate ESG considerations into business and regulatory strategies to enhance the sector's role in achieving sustainability goals.

ESG and firm performance: do stakeholder engagement, financial constraints and religiosity matter?

PurposeThis study revisits the relationship between environmental, social and governance (ESG) activities and firm performance. More importantly, it tests whether this relationship is moderated by critical yet underexplored factors such as stakeholder engagement, financial constraints, and religiosity.Design/methodology/approachA wide range of estimation techniques, including pooled ordinary least squares (OLS), fixed effects, system generalized method of moments (GMM) and propensity score matching-difference-in-differences (PSM-DiD), are employed to investigate such issues in a large sample of firms from 31 countries.FindingsESG performance has a positive and significant impact on firm performance. While stakeholder engagement positively moderates this relationship, financial constraints and religiosity negatively moderate it. Interestingly, this positive linkage is driven by environmental and social performance rather than governance performance.Practical implicationsFirms should proactively engage in ESG initiatives and consider the intervening influences of stakeholder engagement, financial constraints and religiosity in making decisions to invest in ESG activities. Furthermore, our findings can help policymakers understand the financial consequences of ESG practices, which can be helpful in designing new policies to further promote corporate engagement in ESG practices.Originality/valueFirst, our research findings help reconcile the long-standing debate about the value impact of ESG. Second, our paper investigates relatively new aspects of the ESG-firm performance relationship. Third, our study offers more insight into the ESG literature by showing that not all ESG dimensions equally impact firm performance.

Regional (economic) integration, political stability uncertainty and (intra-African) exports

The economic literature reports ambiguous effects of regional economic integration (REI) and political stability on exports. Therefore, this research analyzes the effects of REI and political stability on intra-African exports, compares them to the effects on intra-African imports and explores the combined effect of REI and political stability on intra-African exports. We use the two-stage least squares and fixed-effects approach which includes the two-step feasible generalized method of moments (GMM) estimation to address endogeneity issues in a panel of 49 African countries over the period of 1996–2022. The results show that REI and political stability lead to an increase in intra-African exports. However, while REI results in an increase in intra-African imports, political stability results in a decrease; similar findings are highlighted for overall intra-African trade as well as for total exports of goods and services. The results remain robust across diverse estimation techniques. Furthermore, they reveal that political stability plays a role in amplifying the relationship between REI and intra-African exports. Supporting the African Continental Free Trade Area agenda, these findings imply that African policymakers need to (i) strengthen REI to increase intra-African trade and (ii) improve political stability to ensure that a greater part of REI is canalized in a more effective way in order to boost intra-African exports.

Internal control effectiveness, supply chain management efficiency and capital allocation efficiency: evidence from the COVID-19 pandemic

PurposeThe present study aims to investigate the impact of internal control effectiveness on supply chain management efficiency (SCME) and capital allocation efficiency for companies listed in the Tehran Stock Exchange (TSE). In addition, it investigates the mediating role of supply chain management efficiency in the relationship between internal controls and capital allocation efficiency.Design/methodology/approachThe data about 191 companies in 2014–2022 were examined. The sales per inventory ratio was used to calculate SCME. The present study also applied the Generalized Method of Moments (GMM) for endogeneity concerns.FindingsThe results showed that internal control effectiveness has a significant positive effect on SCME. Moreover, internal control effectiveness and SCME significantly positively affect capital allocation efficiency. SCME has a mediating role in the relationship between internal control effectiveness and capital allocation efficiency. These findings remained robust even after several robustness tests. In addition, this study tested the results' robustness by dividing data into the pre-COVID-19 and post-COVID-19 years. The previous results were also confirmed according to the robustness test of COVID-19.Originality/valueChallenges in the supply chain often hinder capital allocation efficiency. In addition, enterprises should try to establish strong internal controls to ensure SCME. Therefore, the relationship between internal control effectiveness, SCME and capital allocation efficiency is complex and underscores the importance of robust internal controls in optimizing resource allocation within organizations. Interestingly, this topic has not been extensively researched in accounting and business research, and there is a lack of empirical evidence on these effects. Consequently, this study aims to fill the gap and identify potential opportunities for new research directions.

Financial Development and Income Inequality: Evidence from Latin America, 2001-2021

Numerous studies delve into the theoretical frameworks on finance and inequality. However, there are too few empirical tests on its theoretical relations due to a lack of data to capture financial development. Additionally, due to the many social and economic dimensions of a large economy such as Brazil or Argentina, it is unrealistic to consider that labor market or political issues are the only culprits of income inequality. More research is needed to understand the dynamics of inequality. In this paper, we evaluate the influence of financial development on income inequality using nineteen countries in Latin America from 2001 to 2021. Two indicators of financial development are employed. First, I use the broader definition of money, M3, as a percentage of GDP to capture the liquid liabilities because M1 or M2 may be a poor proxy in economies with weak financial systems. Secondly, the ratio of credit to private sector to GDP is employed because financial intermediaries with higher volumes of credit are more involved in financial development, such as diversifying risk, saving mobilization, facilitating transactions, allocating funding to economic activities, and monitoring borrowers’ activities. Based on the GMM estimator, our empirical findings support that better-developed financial markets reduce inequality.

Corporate Governance and Capital Structure Decisions: Moderating Role of inside Ownership

This study empirically investigates the association between board attributes and capital structure decisions of non-financial listed firms in Bangladesh. This study also investigates how this association is shaped and moderated by the level of insider ownership. The current study takes 3096 firm-year observations of firms that are listed on the Dhaka Stock Exchange from 2004 to 2023. Multiple regression analysis on panel data was used, and pooled OLS was selected by resolving stationary issues. Moreover, this study used lagged variables and a GMM estimator to address endogeneity. The results show that both board size and board independence are more positively correlated with a firm’s leverage under conditions of a high level of inside ownership. On the other hand, without the moderating effect of inside ownership, gender diversity on the board does not have any significant impact on a firm’s leverage, and it turns into a positive association due to the moderating effect of inside ownership. This result is consistent with the existing theory and previous findings. After the introduction of corporate governance guidelines, the inside owners’ effect on board size and board independence became substantial, indicating that corporate governance guidelines with the moderating role of inside ownership play a significant role in capital structure decisions in Bangladeshi listed firms.

Labour market feminization and economic development in sub-Saharan Africa

PurposeWomen’s direct or subtle exclusion from the labour market is still evident, necessitating more rigorous inquiries into the subject matter. The study aims to assess the moderating factors that can boost the inclusion of women participation in the labour market by complementing and actualising the doctrine of the feminist U-shaped hypothesis.Design/methodology/approachThis study is situated within the feminist U-shaped hypothesis and employs the generalised method of moments (GMM) on 38 countries in sub-Saharan Africa (SSA).FindingsThis study validates the U-shaped labour hypothesis and expands on the moderating effects of the U-shaped curve in 38 SSA countries.Originality/valueThe study contributes to the influences of human capital development and technological access that can significantly improve the workings of the feminist U- hypothesis in SSA countries.

ESG Integration and Financial Performance: Evidence from Malaysia’s Leading Companies

This study examines the impact of environmental, social, and governance (ESG) scores on the financial performance of the leading publicly listed companies in Malaysia. Using balanced panel data from Bloomberg spanning 2015-2022, the study employs multiple regression analysis (MRA) and the generalized method of moments (GMM) to explore these relationships. The findings reveal a significant positive effect of the overall ESG score on ROA, suggesting that comprehensive ESG practices can enhance financial performance. However, individual environmental (E) and social (S) scores negatively impact ROA at a 10% significance level, indicating potential short-term costs associated with these initiatives. Corporate governance (G) scores, total assets (TA), and total debt to total assets (TDTA) ratios demonstrate a significant adverse effect on ROA. The inclusion of the global reporting initiative (GRI) standard as a control variable also adds robustness to the analysis, highlighting the role of standardized sustainability reporting in evaluating corporate performance. These insights underscore the complex interplay between ESG and companies’ financial performance in Malaysia, emphasizing the importance of considering both the benefits and potential short-term costs associated with ESG initiatives. The findings of this study are crucial for policymakers, corporate managers, and investors, offering guidance on aligning sustainability goals with financial objectives to ensure long-term value creation and risk mitigation. This research contributes to the growing body of knowledge on ESG practices in emerging markets, highlighting the critical role of sustainability in today’s global business environment.

Carbon Emissions and Growth: The Role of Trade and Urbanization in Sub-Saharan Africa

In this study, we employed a system generalised method of moments (GMM) to investigate the effect of trade, urbanization, and income on the environmental quality in a panel of 48 Sub-Saharan African countries, covering the period 1990-2018. Our findings demonstrated that urbanization does not have significant explanatory power over carbon emissions, whereas, trade positively and significantly drives emissions. Our findings further exhibit an inverted U-shape relationship between income and carbon dioxide emissions. This substantiates the existence of an Environmental Kuznets Curve (EKC) in Sub-Saharan Africa. It is therefore concluded that policymakers can focus on growth-promoting policies and should not adopt stringent conservative policies, which may hurt growth and delay the process of reaching a turning point in the Kuznets curve.

Bounded tilting estimation

The search for one-step alternatives to the generalized method of moment (GMM) has identified broad classes of potential estimators such as generalized empirical likelihoods (GEL), empirical cressie-read (ECR), exponentially tilted empirical likelihood (ETEL), and minimum discrepancy (MD) estimators. While empirical likelihood (EL) dominates other ECR estimators in terms of higher-order asymptotics, it lacks robustness to model misspecification. ETEL was shown to combine higher-order efficiency and robustness to misspecification but demands strong moment generating function existence conditions. We show, both theoretically and via simulations, how to achieve the same goal under weaker moment existence conditions within the class of MD estimators.

Innovation and Path to Inclusiveness in Developing Countries

This study examines the effect of innovation on inclusive growth in 63 developing countries and employs System Generalized Method of Moments (GMM) estimation techniques. The study used the global innovation index to measure innovation. In addition, we construct an index of inclusive growth. Further, due to the complex nature of inclusive growth, using a single index may not provide the full picture. So, for substantial empirical support, the study uses a set of dimensions of inclusive growth separately. The empirical results show a positive relationship between the measures of innovation with inclusive growth. Further, the study also constructs indifference curves for selected developing economies to measure the inclusiveness in growth. Finally, it is suggested that developing economies should put in policies to promote innovation activities that include poor segments of society to improve the impact of innovation on inclusive growth.

The Impact of Environmental, Social, and Governance Disclosure on the Performance of Saudi Arabian Companies: Evidence from the Top 100 Non-Financial Companies Listed on Tadawul

This study investigated the relationship between environmental, social, and governance (ESG) disclosure and the performance of Saudi Arabian companies. We analysed panel data from the 100 non-financial companies listed on the Saudi stock exchange (Tadawul) from 2017 to 2022. Using fixed effects, random effects, and generalised method of moments (GMM) models to account for endogeneity concerns, we examined the impact of ESG disclosure on the return on assets (ROA), return on equity (ROE), and Tobin’s Q. An ESG index was constructed through a principal component analysis of individual environmental, social, and governance scores. Our results indicate a significant positive relationship between ESG disclosure and companies’ key performance variables across all models. These findings are consistent with stakeholder theory and signalling theory, suggesting that comprehensive ESG practices can lead to better financial performance and serve as a positive signal to stakeholders. The study also reveals sector-specific differences, with non-manufacturing firms showing stronger positive relationships between ESG disclosure and performance measures compared to manufacturing firms. Additionally, we find that firm size, age, and liquidity are important factors influencing the ESG–performance relationship. This research contributes to the growing literature on ESG and corporate performance in emerging markets, offering valuable insights for policymakers, investors, and corporate practitioners in Saudi Arabia’s evolving sustainable business landscape. Our findings underscore the importance of ESG disclosure in driving sustainable and responsible business practices in the region.

The relative importance of economic policy uncertainty and geopolitical risk on U.S. REITs returns

PurposeOur aim in this study is to investigate the relative importance of the economic policy uncertainty and of the geopolitical risk on U.S. REITs (Real Estate Investment Trusts) returns with a special focus on the different real estate sectors.Design/methodology/approachWe use an augmented Fama-French (1993)’s asset pricing model, including economic policy uncertainty indices (EPU), introduced by Baker et al. (2016), and geopolitical risk indices (GPR) recently developed by Caldara and Iacoviello (2022), to price the potential risk factors for U.S. Nareit indices returns. To obtain robust economic results, we correct for the problems of errors-in-variables in linear asset pricing models; we advocate the use of higher moments estimators as instruments in a generalized method of moments (GMM) framework.FindingsOur results report that economic policy uncertainty (EPU), and geopolitical risk (GPR) are priced for the different Nareit sectors for the last three decades. The GPR index stands as a relevant risk factor. The coefficient estimates are low compared to Fama-French risk factors. They are higher for Shopping Centers, Retail and Region Malls and lower for Health Care and Lodging/Resorts. EPU indices are also priced and less statistically significant. Health Care sector, followed by Shopping Centers and Retail are the most policy-sensitive sectors.Practical implicationsIn their “2023–2024 Top Ten Issues Affecting Real Estate” “political unrest and global economic health” is ranked 1 issue by the Counselors of Real Estate. Our results report that economic policy uncertainty and geopolitical risk are priced for the different Nareit sectors. They suggest implications for investors, insurers, bankers, policymakers and other stakeholders. The geopolitical risk index (GPR) stands as a relevant and significant risk factor for REITs returns.Originality/valueBased on parsimonious robust asset pricing models, the results shed a new light on the relative importance of geopolitical risk and economic policy uncertainty in the real estate sector, with a special focus on the different U.S. REITs sectors. They suggest possible implications for investors, insurers, bankers, policymakers and other stakeholders in a context marked by higher uncertainty shocks and geopolitical risks.

The dynamic role of digital financial inclusion, sustainable energy transition, and governance in achieving global ecological sustainability

AbstractA global surge in socio‐economic activities is putting a massive burden on ecological balance, which has become one of the major challenges worldwide. Yet, it is complicated for national and international authorities to find eco‐friendly and interlinked socio‐economic developments due to a lack of empirical evidence. In this era of digitalization, digital financial inclusion has an ability to create a balance among economy, ecology, and society by conserving natural resources. Meanwhile, it minimizes ecological burden by promoting sustainable energy transition at all societal levels, which is the main agenda of the United Nations (UN) Climate Change 28th Conference of Parties (UN‐COP28). Focusing on these intentions, this research aims to explore the dynamic influence of digital financial inclusion (DFI), sustainable energy transition (SET), and governance (GOV) on global ecological footprints (EFT) by taking a sample of 121 nations within a timeframe of 2003–2022. This study utilizes a two‐step system generalized method of moments (GMM) and Driscoll–Kraay (D–K) regression as prime and robust empirical techniques, respectively. The outcomes reveal that DFI significantly reduces EFT worldwide and upper‐middle‐income samples; however, it significantly enhances EFT in high‐income nations. While DFI has a negative and insignificant connection with EFT in lower‐middle and low‐income countries. Moreover, SET significantly declines EFT in all categories, and mixed outcomes are found for the linkage between GOV and EFT. Some vital policy implications for ecological sustainability are also provided in this research work.

The role of education in moderating the impact of development on environmental sustainability in OECD countries

This study explores the interconnections among industrialization, urbanization, Foreign Direct Investment (FDI), and carbon emissions (CO2e) across 31 OECD (Organization for Economic Cooperation and Development) countries from 1998 to 2020. In addition, it analyzes how education moderates these relationships. This study employs CO2e as the explained variable, while industrialization, urbanization, and FDI serve as explanatory variables, with education as a moderator. This research utilized Hierarchical regression analysis to examine how education moderates the associations among industrialization, urbanization, FDI, and CO2e. Additionally, to validate the reliability of our results, we utilized the Generalized Method of Moments (GMM). The results of this study imply that CO2e levels increase with the level of industrialization and urbanization. The pursuit of education also contributed to the increase in CO2e. Moreover, education and industrialization have detrimental effects on CO2e. To fill this gap in the existing literature, this study investigates the relationship between industrialization, urbanization, FDI, and CO2e, a domain with scarce empirical investigations. Furthermore, this study contributes uniquely to the literature by investigating the moderating influence of education on the relationships between independent variables and CO2e. This original aspect of this research aims to enhance our understanding of the complex connections between these factors.

PENGARUH CASHLESS PAYMENT TERHADAP PERTUMBUHAN EKONOMI: STUDI KOMPARASI NEGARA MAJU DAN BERKEMBANG ANGGOTA G20

The purpose of this study is to analyze the impact of cashless payments on economic growth in G20 countries. Additionally, a comparison of the impact of cashless payments in developed and developing countries is also analyzed. In this study, economic growth is used as the dependent variable, and transaction amounts of debit cards, credit cards, and electronic money are used as the independent variables. Data were collected from various databases for the period 2013-2021 covering a total of 19 countries divided into 10 developed countries and 9 developing countries that are members of the G20. The test results using the Generalized Method of Moments (GMM) dynamic panel found that all three variables have a significant effect in both developed and developing G20 member countries. Furthermore, the study found that the biggest influence of non-cash payments in developed countries is transactions using debit cards while in developing countries it is transactions using credit cards and electronic money. From these results, it was concluded that cashless payments have an impact on economic growth. It is hoped that these findings will provide new insights into cashless payments and their impact on economic growth.

Dampak Industri Halal pada Perekonomian di Indonesia: Pengaruh Pendapatan, Ekspor, dan FDI terhadap PDB Melalui Pendekatan GMM

This research explores the influence of income, exports and foreign direct investment (FDI) on Gross Domestic Product (GDP) in the halal industry in Indonesia, using the Generalized Method of Moments (GMM) approach. This study is based on panel data from companies operating in the halal sector between 2010 and 2022. The results show that income and exports positively and significantly influence GDP growth, confirming the importance of company activities and export performance in driving national economic growth. In contrast, FDI was found to have no significant effect on GDP, indicating that foreign investment's contribution in this sector is not yet optimal or is influenced by other factors such as the quality of institutions and infrastructure. This research provides important implications for policymakers and stakeholders, considering the urgency of improving export strategies, diversifying markets, and improving the quality of institutions and infrastructure to maximize the economic benefits of FDI. In addition, the results of this research also emphasize the important role of the halal industry as a major contributor to Indonesia's economic growth, as well as the need for policies that support further development and diversification of the halal industrial sector.

Leveraging Innovation: Enhancing the Engineering-Economic Growth Nexus in Developing Nations

This study investigates the role of innovation to mitigate the impact of engineering on economic growth in emerging countries. Data from 91 emerging nations from 2000 to 2020 were studied using the Generalized Method of Moments (GMM) panel estimator. Gross expenditure on R&D (GERD) and scientific and technical journals (SCJ) were used as indicators of innovation. The research identifies that innovation substantially amplifies the positive impacts of engineering on economic expansion. To realize innovation-led economic growth, the government needs to boost investments in experimental (R&D) capacities and our engineering industries. As such, the research highlights that uniting engineering and invention is essential for policymakers who hope to improve global long-run economic performance.