Generalized Least-squares Research Articles

Harnessing data assimilation and spatial autocorrelation for forest inventory

Spatially explicit uncertainties in forest above-ground biomass predictions for population units are underestimated if spatial structure in the form of residual spatial autocorrelation and heteroscedasticity is ignored. Methods that consider the spatial structure of biomass model residuals are needed to comprehensively estimate, as well as to effectively reduce, the uncertainty in biomass predictions, for pursuing higher levels of precision for measurement, reporting and verification of forest carbon stocks. The objectives of the study were threefold: (1) to demonstrate a spatial data assimilation (DA) procedure that harnesses small-footprint airborne LiDAR, the best linear unbiased predictor (BLUP) and the spatial structure of biomass model residuals to reduce prediction variances of individual tree biomass and plot-level biomass density; (2) to derive a variance estimator that decomposes the variance into components associated with corresponding error sources; and (3) to compare prediction variances for three methods used to calibrate a height-based allometric model for tree biomass: ordinary least squares (OLS), generalized least squares (GLS), and spatial DA using the BLUP. Five major conclusions are drawn. First, for individual tree biomass predictions, spatial DA decreased prediction variance by 40% and 20% relative to OLS and GLS. Because the decrease in residual variability accounted for 98% of the decrease in prediction variance in total, the assimilation effect was the largest for reducing residual variability. Second, for biomass density predictions, DA decreased prediction variance by 3% and 49% relative to OLS and GLS, with the largest decrease in residual covariance. Accumulated gain in precision for individual tree predictions in the DA procedure was offset by precision loss caused by residual covariance and the variance associated with omission and commission errors while predicting individual tree biomass from the LiDAR data. Third, OLS, which assumed no spatial structure, underestimated prediction variance for LiDAR-predicted biomass density by 48%. Fourth, from the perspective of prediction accuracy, DA reduced the RMSE for individual tree biomass predictions by 11% and 14% and reduced the RMSE for biomass density predictions by 28% and 33% relative to OLS and GLS. Fifth, the omission/commission difference model was effective for correcting the systematic prediction error in the LiDAR-predicted biomass density. Overall, the proposed spatial DA procedure demonstrated great potential for reducing the uncertainty in forest biomass predictions, thereby facilitating more efficient biomass inventories. The procedure can be generalized to other dependent variables of interest given their correlations with new information from LiDAR.

Valuation effects of earnings management on hotel firm value

AbstractThis study investigates the valuation effects of earnings quality on a hotel’s firm value between 1991 and 2017. A unique perspective from the financial crisis period is utilized to explore the changes further when hotel firms face financial distress. We adopt the ordinary least squares (OLS) regression method in this study. Generalized Least Squares (GLS) regression and Petersen’s Clustered Standard Error Model to confirm the validity of results. Seemingly unrelated regressions (SUR) analysis is adopted to compare the impact of the financial crisis on subsamples of low and high Altman Z‐scores and subsamples of non‐Big‐4 and Big‐4 firms. Substantial evidence supports our assertion that increased discretionary accruals and earnings management bring down earnings quality and, in turn, decrease a hotel’s firm value. Results reinforce that the 2008 financial crisis had an impact on the relationship between earnings management and hotel firm value. The negative effect that discretionary accruals and earnings management have on hotel firm value is mitigated for hotel firms with low credit strength or not audited by one of the Big‐4 firms. Stockholders of hotel firms should be aware of the impact and enforce additional measures to control earnings management activities during a financial crisis.

Macroeconomic Factors and Stock Returns: An Approach of Arbitrage Pricing Theory in the Food and Beverage Industry

We examine the efficiency and efficacy of the Arbitrage Pricing Theory model in explaining stock returns in the food and beverage industry. To that end, we analyze the relationship between macroeconomic variables and stock returns before and during the pandemic. In this paper, we use unexpected changes in economic growth, inflation, interest rate, exchange rate, and crude oil price as generating factors and find that these factors have come to explain stock returns movement. Using the generalized least square (GLS) technique, we study stocks from 19 firms listed in Indonesia Stock Exchange over sixteen months from 2018 to 2021. While most significant relations are negative, some are significantly positive. The significant associations suggest that the theory is supported in that estimated expected returns depend on selected generating factors. The result also shows that investors are rational because they consider these factors as systematic risks influencing their profit. Furthermore, we find that there is a difference in stock returns before and during the pandemic, with the average being greater during the pandemic. We assume that this is due to investors’ choice to seek out safe-haven assets in order to limit their exposure to losses.

The effect of audit committee characteristics on earnings management in Nigerian listed firms

This study focuses on the effect of audit committee characteristics on earnings management among Listed Firms in Nigeria with aim to ascertain whether audit committee characteristics has effect on earnings management. Audit committee in an organization is to support firm’s governance and oversight functions with the regard to financial reporting, risk management system internal control structure, ethical accountability and internal and external audit functions. Earnings management is an attempt by managers to alter financial information either for their private gain or for the gain of stockholders. The study population was 190 firms listed in the Nigerian Stock Market. The study sample was 150 firms because 40 firms could not provide the needed data for the study as at 2014 to 2019. The study data was generated from the Thomson Reuters Data stream and other variables were handpicked from the firm’s annual reports covering the period of 2014–2019. A Generalized Least Square (GLS) estimator was used in estimating the parameters. The study provides positive and significant relationship between Audit Committee Independence (ACIND), Audit Committee Meetings (ACMT) and Earnings Management of listed Nigerian Firms in Nigeria. However, negative relationship between Audit Committee Size, Audit Committee Financial Expertise, Firm Size and Earnings Management was reported among the Listed Firms in Nigeria. Policy maker should provide policy on the composition of Audit for the committee members to clearly spelt out to enable members perform their functions effectively. Further study should look at diversity of audit committee, ethnicity, and religious influence because of the Nigerian diversity on ethnicity and religion.

Macroeconomic Factors and Stock Returns: An Approach of Arbitrage Pricing Theory in the Food and Beverage Industry

We examine the efficiency and efficacy of the Arbitrage Pricing Theory model in explaining stock returns in the food and beverage industry. To that end, we analyze the relationship between macroeconomic variables and stock returns before and during the pandemic. In this paper, we use unexpected changes in economic growth, inflation, interest rate, exchange rate, and crude oil price as generating factors and find that these factors have come to explain stock returns movement. Using the generalized least square (GLS) technique, we study stocks from 19 firms listed in Indonesia Stock Exchange over sixteen months from 2018 to 2021. While most significant relations are negative, some are significantly positive. The significant associations suggest that the theory is supported in that estimated expected returns depend on selected generating factors. The result also shows that investors are rational because they consider these factors as systematic risks influencing their profit. Furthermore, we find that there is a difference in stock returns before and during the pandemic, with the average being greater during the pandemic. We assume that this is due to investors’ choice to seek out safe-haven assets in order to limit their exposure to losses.

The Effect of Economic Growth, Population, Minimum Wage, and HDI on Poverty

The purpose of this study was to analyze the effect of economic growth, population, minimum wage, and human development index on poverty rates in Central Java Province. This study uses quantitative methods with panel data, which is a combination of cross-section data from 35 districts/cities in the Central Java Province and time series data for the period 2015-2019. Tests in did study with the Fixed Effect Regression analysis method with the Generalized Least Square (GLS). The results showed that the variable of economic growth and human development index had a negative and significant effect, the population variable had a positive and significant effect, and while poverty rate variable had a positive and not significant effect. Suggestions from the results of this study are: (1) The Local Government should try to push the equal whole infrastructure. (2) KB (Family Plan) Program should be focused in every area of villages. (3) Every regency needs to set the value of minimum paid based on worth life’s standard. (4) Increase the level of education in every village by repairing and adding more devices that support making education better.

Audit quality, audit opinion, and earnings management: Indonesian evidence

Abstract: This research investigates the role of audit quality as moderation on the association between audit opinions and accrual earnings. The sample used in this study is Indonesian companies listed on the Indonesian Stock Exchange (IDX) during 2016 – 2020. The study uses Generalized Least Squares (GLS) regression models to process data. The results show that audit opinions are positively associated with earnings management. When audit quality is examined individually, it negatively affects earnings management. Moreover, when it interacted with audit opinions, the interaction variables negatively affect earnings management. This study contributes to the current literature about auditing and earnings management practices as well as the initial work to investigate the relationship between audit opinion and earnings management, by involving audit quality as a moderation. This study enriches the existing literature about audit opinion, audit quality, and earnings management, especially in the context of an emerging market.

Corporate Governance Dimension and Return on Assets: Evidence from the Nigerian Health Care Sector

The healthcare sector in Nigeria continues to be a hub of innovation, drawing global attention due to its complex and inventive approach in delivering life-improving products and services that cater to diverse healthcare needs. However, the integration of these innovations demands substantial investments, a venture made viable only through effective corporate governance strategies. This research delves into the impact of corporate governance on the returns generated from assets within several healthcare companies listed on the Nigerian Stock Exchange (NSE). Focusing on ten healthcare companies listed on the NSE, this study employs an ex-post facto research methodology. Secondary data sourced from various references are subjected to analysis using the generalized least squares (GLS) regression method. The outcomes of the analysis distinctly demonstrate that the facets of corporate governance exert a palpable influence on the asset returns of the chosen healthcare enterprises. The findings underscore the pivotal role of corporate governance in influencing companies' asset returns. In light of these outcomes, it is deduced that a substantial correlation exists between corporate governance practices and companies' asset returns. Consequently, it is strongly suggested that healthcare enterprises diligently adhere to the principles of corporate governance to augment their profitability in both immediate and enduring contexts. Keywords: Board gender diversity, Board independence, Board size, corporate governance, External audit quality, Return on assets.

Why trust nuclear data evaluations with Bayesian networks

Bayesian networks were recently suggested as a framework for nuclear data evaluation. Their theory was to some extent described in a recent preprint and some example evaluations were presented. However, due to their newness in the context of nuclear data evaluation and consequently the lack of experience with them within the community makes it dicult to develop trust in the underlying methodology and consequently also the results produced by it. In this contribution, we aim to make a case why evaluators can trust this methodology in principle but will also elaborate on the fact that Bayesian networks are not a silver bullet for evaluation work. On the contrary, evaluators must assess and quantify essential assumptions about nuclear models and experiments with the same dilligence that is already necessary for the application of the wellestablished Generalized Least Squares (GLS) method. We also explain that the increased ease and flexibility to introduce assumptions regarding nuclear models, experiments and their relationships can help an evaluator to rigorously account for assumptions that are very often neglected in evaluations with the GLS method, such as the non-negativity of cross sections, relative experimental normalization uncertainties and the non-linearity in ratios of cross sections. We believe that adopting the Bayesian network paradigm can help both humans to produce evaluations with clearly traceable assumptions and machines to deal with nuclear data more eciently in terms of execution speed and storage size requirements.

The Impact of Business Strategy between Corporate Ownership and Investment Efficiency

In this study, the effect of firm strategy—prospector and defender—on successful investments in various ownership arrangements is investigated. The non-financial firms listed on the Pakistan Stock Exchange (PSX) between 2011 and 2020 are the subject of this study, which is the first of its kind. The analyses included a generalized least squares (GLS) regression model for data analysis techniques. The findings of the study demonstrate that the prospector approach favourably moderates the link between concentrated ownership, institutional ownership, and managerial ownership, while adversely affecting the correlation between family ownership and investment efficiency. In contrast, the family ownership-investment efficiency is favourably moderated by the defender strategy. However, defender business strategies with management ownership are unaffected. Checks, alternate measurements, and model specifications all corroborated these conclusions. To make a new investment and achieve effective business performance, practitioners and investors alike need pay close attention to the research factors.

Tax Incentives and Growth of Listed Oil and Gas Companies in Nigeria

This study examined the effects of tax incentives on business growth of the listed Oil and gas companies in Nigeria. The ex-post facto research design was adopted for this study. The population of this study consists of the 12 listed Oil and gas Companies on the Nigerian Stock Exchange from which samples size of ten (10) firms was considered due to availability of data. The panel secondary data were collected from annual reports of the sampled companies for a 7 year period. In analyzing the data, Generalized Least Squares (GLS) was used. The results revealed that capital allowance has no significant relationship with business growth of the sampled listed oil and gas firms in Nigeria. The results also show that there is positive significant relationship between investment allowance and business growth of listed oil and gas firms in Nigeria. While the findings of the study showed that loss relief has a positive significant relationship with business growth of listed oil and gas firms in Nigeria, it was also disclosed that there is significant relationship between allowable interest and business growth of listed oil and gas companies in Nigeria during the period under review. The study therefore recommended that the Government should lay more emphasis on the role of tax incentives and help firms to understand tax law so as to utilize all the available tax incentives which in turn contribute to the growth of oil and gas businesses in Nigeria. The study also recommends there is need for the downstream sector to employ more loan to save tax and use the tax savings to grow the business.

Do Financial Expertise, Nationality and Independence of Women on Corporate Board Mitigate Earnings Management of Listed Firms on NXG.

This study evaluates the influence of financial expertise, nationality and independence of women on board of directors on earnings management of listed firms on NXG. Applying purposive sampling, a firm-year observation of 715 comprising 65 non-financial firms and secondary data from annual reports for 11years (2011-2021) were analysed using the holistic earnings management model. The outcome of the Generalised Least square (GLS) regression revealed that the measures of corporate board gender diversity attributes, CBGDAttr, (WOBFEXP, WOBNAT and WOBIND) jointly exert significant influence on earnings management (EARNMGT) of listed firms on NXG and upon this findings, it recommended that shareholder should strategize to increase gender diversity ratio to about 40% and that the nomination and governance subcommittee should take cognizance of the qualifications (financial expertise) and the independence of the female directors (INEDs) before appointment while considering appointing female foreigners with different nationalities having shares into the board to foster a creative environment where sharing of ideas and expertise across borders thrive; contributing to effective decision-making.

Covariance evaluation of neutron cross sections in CENDL

The covariance evaluation for neutron cross sections in CENDL is briefly introduced in this work. The methodology for evaluation contains the nuclear reaction theoretical model-dependent approach and the non-model dependent one according to the amount of experimental data. Both approaches are based on the Generalized Least-Squares (GLSQ) method. To obtain more reliable uncertainties from experimental measurement, the analysis of the sources of experimental uncertainties (ASEU) is used rigorously in the evaluation. Moreover, machine learning (ML) methods which can deal with the data mining with a more automatic way are employed to evaluate the cross sections in a large-scale nuclear mass region to compensate the uncertainties on some nuclides and reactions, lack of experimental data for, e.g., unstable nuclei and fission products. The covariance files for 70 fission product nuclei are obtained through the model-dependent method in CENDL-3.2, and the covariances for U and Pu isotopes have also been finished with high fidelity, which will be released as part of the next CENDL.

Does Sharia Banking have the Capability to Increase Micro, Small and Medium Enterprises Financing?

The contribution of Micro, Small, and Medium Enterprises (MSMEs) has played an important role in GDP and employment growth in Indonesia in the last decades, but still, MSMEs have difficulties accessing bank loans. This study examines the effect of internal factors of Islamic banking performance ratio, financing to deposit ratio, capital adequacy ratio, non-performing financing of total financing, and non-performing financing for MSMEs on the development of MSMEs financing in Islamic Banking in Indonesia. It consists of three Islamic Financial Institutions; Islamic Commercial Banking, Islamic Business Unit Bank, and Islamic Rural Banking from January 2015 until December 2021 (monthly base), using secondary data with 252 observations. The regression model used in this research is Generalised Least Squares (GLS), using Panel Data and the random effect model approach. The results of this study showed that all independent variables, financing to deposit ratio, capital adequacy ratio, non-performing financing of total financing, and non-performing loans for MSMEs, have a significant effect on MSMEs’ financing growth. This study indicates that the contribution of the capital adequacy ratio has a significant positive effect on the growth of MSMEs financing. Also, the financing to deposit ratio and non-performing financing from total financing negatively affect MSMEs financing growth. Besides that, the non-performing financing for MSMEs relatively had no strong negative effect on MSMEs financing growth in sharia banking in Indonesia.

Speed of Adjustment and Leverage Deviation - Cost of Equity Nexus: Evidence from Emerging Markets and Crisis

Purpose: This study investigates the impact of leverage deviation on the cost of equity under the specifically mentioned condition in ASEAN-5 considering the global financial crisis and the sensitivity of the cost of equity on leverage deviation.
 Design/methodology/approach: This study employs the Generalized Least Square (GLS) model and the dynamic panel estimation based on the two-step difference GMM to analyze the data.
 Findings: The regression analysis found deviated from the target leverage impact unfavorably on the firm's cost of equity. The results also show that the more sensitive the cost of equity is to the leverage deviation from the target, the faster the adjustment. However, firms will adjust their capital structure for a lower cost during the crisis. Additionally, it shows a compelling behavior in the relation between the sensitivity of the cost of equity to leverage deviation on the leverage speed of adjustments.
 Research limitations/implications: The higher sensitivity of the cost of equity is to the leverage deviation from the target, the faster the adjustment. It implies that the disregard of heterogeneity in SOA will mislead the adjustment period to the target leverage.
 Originality/value: Using manually collected data, this study provides empirical evidence on the importance of leverage deviation and the sensitivity of the cost of equity and the speed of adjustment to the target debt level to analyze capital structure decision in an enormous leverage usage in ASEAN. Second, this paper presents new evidence of the effect both in normal economic conditions and crisis periods, which is rarely examined in the ASEAN emerging market.

How Capital, Labor, and Technology Influence Java’s Economic Growth

Indonesia is a developing country with a relatively stable economy, as can be seen in Indonesia’s real GDP per capita, which tends to increase before the Covid-19 pandemic. However, there is a disparity in economic growth between Java and outside Java. During the 2010-2020 period, Java’s economic growth reached 61.9%, while outside Java was only 48.5%. According to the Solow Model theory, three factors can influence economic growth: capital, labor, and technology. Therefore, this study aims to determine the effect of capital, labor, and technology on economic growth in Java. This research was conducted using two approaches, namely generalized least square (GLS) and mixed-effect regression model (MEM). Both methods show the same result that capital and labor have a significant positive effect on the real GRDP of the provinces in Java. In contrast, technology has an insignificant effect on the real GRDP of the provinces in Java. This study also found significant random effects among provinces in Java for the number of workers and capital, but not on technology.

Trade off Between Military Expenditure and Fixed Capital Formation on Economic Growth: Panel Study of Some SAARC and ASEAN Countries

This paper intends to investigate the relationship between military expenditure and fixed capital formation on economic growth of some SAARC and ASEAN countries including Nepal with balanced yearly panel data of military expenditure (MILEX), gross fixed capital formation (GFCF) and constant GDP as the proxied for the variables of interest over the period of 2001 to 2020. The quantitative strategy is applied to establish the presumed relationship. The paper employs the cross-sectional dependency test, then panel generalized least square (GLS), fully modified ordinary least square (FMOLS), and finally Dumitrescu-Hurlin panel causality approaches. The CD test shows the cross-section dependency among the panel groups. The panel GLS reveals that there is positive relationship between both military expenditure and fixed capital formation on economic growth. However fixed capital formation is more crucial than military expenditure on economic growth. FMOLS suggests that military expenditure and fixed capital formation can promote economic growth but more by fixed capital formation. However, D-H panel causality does not support the view of casual relationship between military expenditure and fixed capital formation on economic growth. But there is unidirectional relationship between economic growth on explanatory variables and there is bidirectional causality between military expenditure and fixed capital formation. The stylized facts suggest to sampled countries that they need to focused on fixed capital formation with maintaining the minimal level of military to accelerate the growth. This paper has an attempt to fill the empirical gaps in Asian countries with Nepal. The updated panel data and comparative studies support to scientific communities cum policy makers of respective countries.

Does political connection influence corporate financial decisions in unstable political environment?

The aim of this study is to examine the impact of political connection on the cost of debt, the cost of equity and the investment level in an unstable political environment. We use a sample of 55 Tunisian listed firms during the post‐revolution period (2011–2018) and we apply a generalized least square (GLS) approach to test our hypotheses. Findings highlight that political connections increase the corporate financial costs and reduce the investment level. Furthermore, in an additional analysis, we show on the one hand that political instability negatively affects the investment and affects positively the cost of debt and the cost of equity. On the other hand, we make evidence that the political instability level negatively affects the relation between the political connection and the cost of debt. The contribution is, to the best of our knowledge, the absence of studies conducted in Tunisia countries examining the impact of political connection on the financial cost and investment level in an unstable political environment such as Tunisia.

Economic Efficiency of Climate Smart Agriculture Technology: Case of Agrophotovoltaics

Climate change must be the most serious environmental crisis of the present human generation. While corresponding climate-smart agriculture (CSA) practices are emerging, the extent to which CSA is profitable to farmers is unclear. In this paper, we focus on agrophotovoltaics (APV), one of the CSA policies intensively pursued by the Korean government, to analyze the profitability of APV and its implications for rural sustainability. First, we consider the total profit of farms before and after APV installation by a region through generalized least squares (GLS) to verify that APV has overall profitability through the region. Additionally, we estimate farms’ productivity by region with a generalized method of moments (GMM) to compare with the results of the profitability. We predict that APV installation will be more profitable than not installing, and the regions with lower productivity will show higher profitability than other regions. The results are in line with the prediction. The profitability of APV is verified in all regions, and the order of profitability by region and productivity by region are opposite to each other. It suggests that regions with lower productivity may have a higher preference for installing APV, implying the installation of APV provides a new incentive to continue farming even in regions with low agricultural productivity. These results have an important policy implication on rural sustainability since the implementation of CSA could generate a sound and sustainable farming environment by addressing the challenges of climate change.

Capital stock, energy, and innovation-related aspects as drivers of environmental quality in high-tech investing economies

By looking at the technological advancement and climate change mitigation plan of the advanced economies, the current study examines the role of sustainable development aspects such as innovations, high technology export, labor productivity, capital stock, research and development (R&D), information and communication technology (ICT), capital stock, and energy use in mitigating environmental degradation for the selected panel of countries with the most investment in technology (China, Denmark, Finland, France, Israel, Korea, Hong Kong, Germany, Japan, Netherlands, Singapore, Sweden, United Kingdom, and United States) over the period 2000–2018. Foremost, the pooled ordinary least square (POLS) and random-effects (RE) generalized least squares (GLS) approaches provided additional interesting inferences. As such, the POLS result revealed that only capital stock in the panel countries shows a desirable environmental effect. At the same time, labor productivity, innovation, R&D, ICT, and energy further hamper ecological quality in the examined panel countries. Similarly, the GLS result largely affirms the POLS results, with only the capital stock among the explanatory variables showing evidence of emission mitigation effect in the panel. Additionally, the panel Granger causality result illustrates evidence of unidirectional causality only innovation, ICT, and capital stock to environmental degradation.