Heckman's Two-stage Research Articles

ESG rating declines and stock price crash risk

ABSTRACT This study examines the association between ESG rating declines and stock price crash risk. Using a sample of China’s A-share listed companies from 2011-2022 and the Hua Zheng index as ESG rating, we find that ESG rating declines increase stock price crash risk. Our main findings are robust to various tests, including replacing the measurement of independent and dependent variables, Heckman two-stage, and propensity score matching analysis. We find evidence that ESG rating declines influence crash risk through increasing agency costs and business risk. Furthermore, this relationship is more pronounced for firms audited by non-Big Four accounting firms, non-state-owned enterprises (SOEs), those with lower analyst coverage, lower information transparency, and those operating in heavy pollution industries. Our research shows how the market responds to non-financial indicators, highlighting the necessity for entities to transparently disclose their ESG performance and improve methods to mitigate stock price crash risk.

Financial geographic structure and innovation quality: Evidence from Chinese firms amid economic policy uncertainty

In countries where indirect financing dominates, the geographic distribution of financial resources to firms is crucial in enhancing credit availability and improving innovation quality. This study examines the impact and heterogeneity of financial geographic structure on firm innovation quality. Using the number of bank branches surrounding Chinese listed companies as a proxy for financial geographic structure, we employ a multidimensional fixed effects model and Heckman's two-stage method, finding that a higher density of bank branches significantly enhances firms’ access to credit. This fosters innovation by increasing invention patent applications in high-tech non-state-owned enterprises and green patent applications in non-high-tech state-owned enterprises. However, as economic policy uncertainty increases, the positive effect of financial geographic structure on firm innovation diminishes. Hence, countries facing substantial policy uncertainty and relying on indirect financing must strengthen multilevel financial markets and encourage commercial banks to provide greater support for firms pursuing higher levels of innovation.

Scientific disclosure and corporate misconduct

This study examines the relationship between scientific disclosure and corporate misconduct. Through an analysis of comprehensive databases containing core journal publications and documented misconduct cases, we established a significant negative correlation between scientific disclosure and corporate misconduct. This association is particularly evident in firms with publications in English-language core journals. Our findings are corroborated by a series of rigorous robustness tests, including change analyses, instrumental variable estimation, Heckman's two-stage method, and the difference-in-differences approach. Moreover, our investigation into potential mechanisms reveals several pathways through which scientific disclosure may mitigate misconduct. These mechanisms include the attraction of high-quality talent, promotion of technological innovation, establishment of a positive reputation, acquisition of R&D subsidies, and deterrence of opportunistic corporate cultures. Ultimately, our results contribute to a more nuanced understanding of the role of corporate scientific disclosure in reducing misconduct and highlight the beneficial effects of corporate investment in scientific research.

When is digital transformation beneficial for coupled open innovation? The contingent role of the adoption of industry 4.0 technologies

The impact of digital transformation (DT) on open innovation (OI) has attracted growing interest. However, the nuanced effects of various forms of coupled OI on innovation outcomes remain underexplored. This study aims to investigate the differential impacts of coupled OI modes on innovation performance within the context of DT driven by Industry 4.0 technologies. To test the hypotheses, we used Heckman's two-stage estimation utilizing the Korean Innovation Survey 2022. The findings reveal that collaborative activities as coupled OI modes positively impact innovation performance. Furthermore, the adoption of Industry 4.0 technologies amplifies the positive impact of research and development (R&D) collaborations on business process innovation while diminishing the positive effect of non-R&D collaborations on new product development. This study's contribution to the literature lies in its finding that the adoption of Industry 4.0 technologies can only be beneficial to firms when DT guides the focal firm on being more cooperative in R&D collaboration activities and therefore helps focal firms to use innovation opportunities efficiently and more rapidly and to innovate diverse business processes. In practice, a firm should have sufficient capabilities to rigorously analyze DT-adoption data to capture market needs.

Climate smart agriculture practices by crop farmers: Evidence from south east Nigeria

Climate change has severely impacted African countries, particularly Nigeria, affecting farmers' productivity due to adverse weather conditions. Climate Smart Agriculture (CSA) has emerged as a crucial approach to ensure sustainable agricultural growth and food security. This study aims to identify the sources of awareness, prevalent innovative agricultural practices, determinants of CSA adoption, and the intensity of CSA practices among crop farmers in Southeast Nigeria. A two-stage multi-random sampling technique was employed to collect data from 270 farmers across various locations in Southeast Nigeria through questionnaires. The analysis used descriptive statistics and Heckman's two-stage selection model to evaluate the sources of awareness, the extent of CSA practice, and factors influencing CSA adoption and its intensity. Results indicate that cooperative societies and extension workers are the primary sources of CSA awareness in the region. Key determinants of CSA adoption identified in the study include gender, household size, farming experience, education level, labor force size, income, extension exposure, credit access, risk orientation, and cooperative membership. The Heckman model revealed that cooperative membership significantly increases the probability of CSA adoption, while risk-averse farmers are less likely to adopt CSA practices. The study concludes that while CSA practices are recognized and adopted to some extent, their implementation is insufficient to comprehensively combat the effects of climate change. Enhanced efforts to promote and integrate CSA practices more widely are critically needed. To improve CSA adoption and effectiveness, it is recommended to provide increased support for cooperative societies and extension services, better access to credit, and targeted education and training programs for farmers. Additionally, policies should focus on reducing risk aversion among farmers by providing insurance schemes and other risk management tools.

How female leadership and auditor affiliations shape audit fees: evidence from Egypt

Purpose This study aims to examine how female directors on corporate boards and audit committees, and auditor affiliations (Big 4 versus Egyptian firms affiliated with foreign auditors), influence audit fees. This examination is driven by the global call for increased female representation in leadership roles and its potential implications for audit quality and financial transparency. Design/methodology/approach A sample of non-financial companies listed on the Egyptian Stock Exchange is used for the period 2011–2020. The authors used multivariate regression models, the Heckman two-stage and tokenism to support the analysis. Findings The results are threefold. First, this analysis reveals that female directors, whether on corporate boards or audit committees, are more likely to choose higher-quality audits in the form of high audit fees. Second, both Big 4 firms and Egyptian audit firms affiliated with foreign auditors are positively associated with audit fees and earn significant audit fee premiums. Third, a minor difference in audit fee premiums could be attributed to the existence of female directors. Research limitations/implications Future research may expand the analysis performed in this study by investigating the characteristics related to female directors (e.g. education, experience and age) on audit fees. Practical implications This study suggests insights for regulatory bodies, corporate decision-makers, auditors and corporate governance researchers. For instance, this study reveals that the Big 4 are not homogenous and provide different audit quality levels along with significant audit fee premiums. Originality/value This study extends and contributes to the growing literature on female representation in corporate leadership. First, this study adds to the limited research in Egypt by examining the effect of female board representation on audit quality. Second, this study adds to the extant literature on the gender of financial experts by demonstrating that female financial expert is more likely to demand high-quality audits. Finally, the results have significant implications for policymakers. For instance, this study reveals that the Big 4 are not homogenous and provide different audit quality levels along with significant audit fee premiums.

Firm-Level Determinants of Export Performance in Kenya’s Manufacturing Sector

Purpose: This study aimed at investigating the firm-level determinants of export performance (export propensity and export intensity) in Kenya’s manufacturing sector using firm-level panel data obtained from the World Bank Enterprise Surveys for the periods 2007, 2013 and 2018. Methodology: The study adopted a quantitative non-experimental research design. The Heckman Two-Stage estimation procedure was employed to jointly establish the firm-level determinants of export propensity and export intensity in Kenya’s manufacturing sector. Findings: Based on the estimation results, firm-level total factor productivity, firm size, human capital, cost of material, electricity cost and foreign ownership had positive and significant effects on firms’ export propensity while labor productivity negatively influenced export propensity. Firm age, capital intensity and research did not have significant effects on export propensity. On the other hand, export intensity was positively influenced by firm-level total factor productivity, foreign ownership, firm size, firm age, human capital and research. Labor productivity had a negative effect on firms’ export intensity. Whereas the effect of energy cost on export intensity was weakly significant at 10 percent level of significance, there was no significant effect of cost of material on export intensity. Unique Contribution to Theory, Practice and Policy: Employing the new ‘new’ trade theory, the study tested the self-selection hypothesis by analyzing the determinants of export propensity and intensity. According to the self-selection hypothesis, one of the key positive determinants of export propensity and export intensity is firm-level total factor productivity. The study findings validated the self-selection hypothesis since the results revealed firm-level total factor productivity as a positive and significant determinant of both export propensity and export intensity for Kenya’s manufacturing firms. According to the study's conclusions, the government and enterprises must focus on policies that increase firm-level total factor productivity, firm size, human capital, and research in order to improve firms' export performance.

Swiss Cooperation Funding for Local Government Management in Benin: Impacts on Family Farming from Maize Production Yield Perspective?

The aim of this research was to contribute to the literature on the impact of funding (subsidies) on farmers' productivity and hence on local development. To achieve this objective, the data collected concerned sample of 521 maize producers accessing from PASDeR spread over the intervention zone (Borgou, Alibori, Atacora and Donga). Heckman's two-stage estimation method was used to make the estimates. Based on the results obtained, we found that the selection process for financial subsidy beneficiaries is optimal. It was demonstrated that the financial subsidy is significant in justifying maize yield. However, the correlation between the financial subsidy and maize yield is negative, confirming the assertion of Blair, 1984 and Sonne 2010. This is because PASDeR's target group is mainly poor and does not have easy access to conventional financial services to bridge funding gap. Finally, policy recommendations aiming to strong involvement of elected representatives, an in-depth diagnosis of the real and complete needs of farming and the rigorous monitoring of beneficiaries must be addressed.

Unlocking the mergers and acquisitions puzzle in the United Arab Emirates: Investigating the impact of corporate leverage on target selection and payment methods.

Following a long stream of literature on the drivers of Mergers and Acquisition (M&A) activities, this study examines the effect of corporate leverage on several decisions of M&A deals in the context of the United Arab Emirates (UAE). Using M&A data from the Thomson One database for the period between 2005 and 2022, we find that corporate leverage significantly influences the type of M&A target. This study further adds to the prior literature on the contradictory behaviours of high and low leverage firms by examining whether acquisition decisions differ amongst them in M&A deals in the UAE context. Results indicate that high (low) leverage firms are less (more) likely to acquire private targets and more (less) inclined to acquire a target from a different (same) industry. Furthermore, our results show that the relationship between the method of payment used in M&A deals and corporate leverage is insignificant. We control for endogeneity using Heckman's two-stage method. In brief, this paper extends the literature with conclusive evidence that considerations of capital structure can significantly anticipate and explain firms' behaviour toward M&A choices. The implication of findings may include a call to reform some aspects of the Competition Law in the UAE by requiring private firms to enhance their disclosure practices similar to their public counterparts.

Does conservation tillage adoption improve farmers’ agricultural income? A case study of the rice and fish co-cultivation system in Jianghan Plain, China

This study analyses the income effects of farm households' conservation tillage adoption on agricultural income in China. Based on survey data of 704 farm households from Jianghan Plain, central China, Heckman two-stage and propensity score matching models are employed to quantitatively measure the income effect of farm households' adoption of rice and fish co-cultivation, including six aquatic animals. The results reveal that most farmers have adopted rice and fish co-cultivation methods, but with limited adoption intensity. The number of farmers engaged in co-cultivation and farmers' degree of knowledge and cognition significantly influence adoption and increase adoption intensity. Compared with the non-adoption group, the agricultural income of rice and fish co-cultivation system adoption improved adopters’ incomes by 35.15%. In conclusion, rice and fish co-cultivation publicity, technical training and compensation are highly beneficial and recommended.

Is there an association between intimate partner violence and the prevalence of cervical cancer screening in Jordan?

Major health inequalities exist surrounding the utilisation of cervical cancer screening services globally. Jordan, a low- and middle-income country, has poor screening rates (15.8%), with barriers to accessing services, including lack of education. Emerging studies demonstrate that intimate partner violence (IPV) impacts reproductive health decisions. As a large proportion of Jordanian women have reported experiencing IPV, this study examines the association between IPV and cervical cancer screening in Jordan, the first of its kind using national-level data. Using Jordan's Demographic Health Survey 2017-18, cervical cancer screening awareness and self-reported screening were estimated in participants who answered questions on IPV (n = 6679). After applying sample weights, Heckman's two-stage probit model determined the association of awareness and utilisation of cervical cancer screening with experience of IPV, adjusting for the socio-economic factors. Of the women with privacy to answer the IPV module, 180 (3.4%) were found to be victims of sexual violence, 691 of physical violence (12.6%) and 935 (16.2%) of emotional violence. Women subjected to sexual violence were less likely to admit to having awareness of a Pap smear test; however, this did not impact screening rates. Victims of emotional violence were more likely to be screened than non-victims. No association between physical violence and cervical cancer screening was found. A significant association between cervical screening awareness and IPV demonstrates that cancer screening policies must consider IPV among women to improve screening awareness. The paper further sheds light on the paradoxical association between emotional violence and screening. It is acknowledged this situation may be far worse than reported, as women without autonomy were unlikely to answer IPV questions that may endanger them-targeted surveys on cervical cancer screening warrant further investigation.

Creativity, innovation and employment growth in sub-Saharan Africa

PurposeAlthough employees' creativity is vital for firm innovation and overall performance, little is done to examine the potential association between creativity and employment. This paper investigates the contribution of employees' creativity, process and product innovations to firm-level employment growth.Design/methodology/approachThe authors use data from World Bank Enterprise Survey and Innovation Follow-up Survey on 9503 firms covering the period 2012–2015 in 11 countries from sub-Saharan Africa and Heckman's two-stage estimation model.FindingsThis study's results indicate a positive role of creativity on firm-level employment growth. In addition, the authors find evidence for a complementary effect arising from the combination of creativity with managerial experience, staff level of education and their associated skills, in contrast, combining creativity with internal or external R&D results in a substitution effect. Interestingly, these synergy effects are pronounced for SMEs but absent for large firms.Practical implicationsPolicy makers in developing economies of sub-Saharan Africa should stimulate company management to use free time offered to employees to be creative in the workplace as one of their key strategies to stimulate employment growth. This strategy is expected to be particularly fruitful among SMEs having some managerial experience and skilled stuff.Originality/valueIn contribution to innovative work practices and workforce creativity, the authors demonstrate that providing employees with free time could be an alternative way to enhance the focal firms' performance.

표본 선택 모형을 통한 밀레니얼 세대의 인턴십 경험이 취업 및 임금에 미치는 영향 분석

The aim of this study is to analyze the influence of internship experiences on the employment and wages of millennials during their college years to understand the actual labor market outcomes of internships. For this purpose, we utilized data from the 2020 Graduate Occupational Mobility Survey (GOMS 2019) to estimate a probit model and a wage equation using Heckman two-stage model. First, the model validity analysis confirms that the Heckman's sample selection model is statistically significant for this study, exhibiting a negative correlation, with smaller wages having a higher probability of being selected into the sample. Second, the first-stage of Heckman’s probit model analyzed the effects of internship experiences on employment, revealing that internships positively impact employment prospects. This impact was statistically significant with regard to gender, academic grade, metropolitan region, and the father's level of education. Third, in Heckman's two-stage wage equation estimation, it was found that internship experience did not influence wages, wherein the study showed that regular employees earned approximately 22% more than non-regular employees.

Is corporate digital transformation a tax haven?

PurposeCorporate digital transformation (CDT) has challenged traditional tax administration systems. This study examines the impact of CDT on tax avoidance behavior and tests whether tax authorities can identify this behavior.Design/methodology/approachUsing data on listed companies on the Shanghai and Shenzhen Stock Exchanges from 2008 to 2020, this study applies the Heckman two-stage and cross-section models.FindingsThe results show that the higher the degree of CDT, the more aggressive the tax avoidance behavior. The CDT's impact on corporate tax avoidance is more significant under strong government tax efforts.Originality/valueThis study expands research on the economic consequences of CDT and the factors influencing corporate tax avoidance behavior. Moreover, it has important implications for governments to monitor tax avoidance behavior under the CDT, improve digital tax systems, and pay more attention to the tax administration of digital assets.

Factors affecting investor demand in a health emergency

This paper investigates the influence of COVID-19 exposure and China exposure disclosed by companies in their annual reports on firm value. Research data were obtained from annual reports. The study used observations of 430 companies listed on the Indonesia Stock Exchange during 2019 and analyzed using ordinary least squares (OLS) with fixed industry effects and standard error estimation with Stata 17.0 software. The study also used the Heckman two-stage as a robustness test. The results show a positive and statistically significant relationship between COVID-19 and firm value. The same result is also shown in the relationship between China exposure and firm value. Our research provides evidence that exposure to the COVID-19 situation resulted in an increase in firm value during the period. Additionally, these results were found to be robust by the Heckman two-stage test. With these research findings, companies can identify factors that can influence an increase in firm value, including providing clear disclosure on company conditions such as COVID-19 and China exposure. Companies that comprehensively disclose their information during uncertain environmental situations will provide opportunities for them to generate a more positive performance, as stakeholders provided funding facilities for companies to pursue growth during the COVID-19 period. Therefore, the COVID-19 factor as a form of exposure for companies is expected to encourage companies to continue to adapt and innovate.

The impact of corporate digital strategic orientation on innovation output

Given the development of the digital economy, the shift to digitalization is an inevitable direction for corporate strategic planning. This empirical study investigates the impact of corporate digital strategic orientation on innovation output. It also examines the moderating effects of executive equity and compensation incentives on the relationship between corporate digital strategic orientation and innovation output. We selected a sample of Chinese listed companies and adopted the Heckman two-stage and two-stage least square (2 S LS) methods to control for potential endogenous problems. Our findings indicate that corporate digital strategic orientation significantly enhances innovation output. Additionally, we found that executive compensation and equity incentives positively moderate the impact of corporate digital strategic orientation on innovation output, with equity incentives having a greater moderating effect than compensation incentives. Further analysis shows that the impact of corporate digital strategic orientation on innovation output is greater in non-manufacturing industries and non-state-owned enterprises. Our study provides policy insights on how companies can enhance their innovation capability in the digital economy.

Do different types of vocational education and training programmes influence earnings? Recent evidence from India

PurposeIndian government initiated several skill development policies and different types of vocational education and training (VET). Yet the participation in skill education is low because of poor labour market outcomes. This paper aims to calculate returns to skill education to understand the type of training that will have better labour market outcomes.Design/methodology/approachIn this paper nationally representative data from the periodic labour force survey (PLFS), collected by the national sample survey office for 2017–2018, are used to estimate the returns to formal and non-formal VET obtained (after different levels of general education) with the help of Heckman's two-stage method.FindingsNearly 8% of the working-age population has received some form of VET (mostly non-formal), generating poor returns. For the overall population, formal on-job training (OJT) and full-time VET influence wage positively and significantly. Full-time VET obtained after secondary and below levels of education generates positive returns, whereas part-time VET is profitable only to those without formal education. At the graduate level, technical education obtained along with VET is associated with better wages.Originality/valueIn India where a considerable proportion of the workforce is employed in the informal sector, different types of skill training like full-time, part-time and OJT influence labour market outcomes. This finding has policy implication for countries with large informal sector and calls for further research in such countries.

The spatial distribution and expansion of Eucalyptus in its hotspots: Implications on agricultural landscapes

Fast coppicing plantations like Eucalyptus are becoming an ever increasingly important land use system globally, including the Eucalyptus hotspot highlands of Northwestern Ethiopia. However, comprehensive information regarding species composition is essential for proper planning and policy decisions. The current study mapped the spatial distribution of Eucalyptus globulus (hereafter referred to as Eucalyptus) and identified the key push factors for its expansion. The study used a mapping procedure that uses Landsat imagery together with ground truth data based on supervised training of a pixel-by-pixel classification algorithm within image regions to distinguish areas of Eucalyptus plantations from other classes. High-resolution multispectral and multi-temporal remote-sensing images were combined with ground truth data to produce robust features of Eucalyptus plantation distribution maps. Heckman's Two-Stage econometric model was also employed for determining the major driving factors of Eucalyptus expansion. The results of the mapping algorithm were Eucalyptus plantation distribution maps of 30 × 30 m resolution that showed temporal changes from 1999 to 2021. The findings revealed that Eucalyptus coverage increased by 55% during the period from 1999 to 2010 and the change expressively increased to 69% in 2021 with respect to the reference period. The study also found that a number of push factors influenced the size of land planted with Eucalyptus. The developed maps showing the spatial distribution and expansion of Eucalyptus will help policymakers properly manage the ecosystems and agricultural landscapes of Eucalyptus growing areas.

Potential Characteristics of Supervisory Board, Company Asset Scale and Irregularity of Listed Companies: Empirical Analysis Based on Heckman Two-Stage Model

Potential Characteristics of Supervisory Board, Company Asset Scale and Irregularity of Listed Companies: Empirical Analysis Based on Heckman Two-Stage Model

Executive poverty experience and innovation performance: A study of moderating effects and influencing mechanism.

This paper analyzes the impact mechanism of executive poverty experience on innovation performance from the two logics of “innate endowment” and “endogenous power.” It then explores the moderating role of executive characteristics, firm nature, and market competition from the perspective of heterogeneity, and finally proves the influence mechanism. Using the data of Chinese A-share listed companies from 2012 to 2020, the empirical results show that executives’ poverty experience improves corporate innovation performance. Further studies find that female executives with poverty experience have a more significant impact on innovation performance. Additionally, state-owned enterprises (SOEs) weaken the positive effects of executives with poverty experiences on innovation performance. The impact of executive poverty experience on innovation performance is more significant in fierce market competition. The mediating result suggests that executive poverty experience improves innovation performance partly by inhibiting R&D manipulation. The findings remain valid through Propensity Score Matching (PSM) tests, the Heckman two-stage, and alternative indicator measures. Using the early life poverty experience of executives, this study promotes research on the factors influencing corporate innovation. It also provides empirical evidence for improving corporate innovation performance through a study of moderating effects and influencing mechanisms.