Least Square Dummy Variable Research Articles

Empowering rural South Asia: Off-grid solar PV, electricity accessibility, and sustainable agriculture

This study investigates the impact of off-grid solar photovoltaic (PV) systems on electricity accessibility and agricultural sustainability in rural South Asia, employing panel data methodology: least square dummy variable (LSDV) and Lewbel instrumental variable (IV) approach. The findings demonstrate a robust positive association between solar PV adoption and increased electricity access, even when accounting for individual and period-specific factors. Increased electricity access significantly contributes to higher agricultural value added per worker, but not necessarily to the overall share of agriculture in the economy. This analysis also reveals a positive and significant impact of solar PV (SPV) on agricultural value added per worker, independent of rural electrification levels. Heterogeneities across time and context, along with country-specific factors, play crucial roles in shaping these relationships. While factors like government effectiveness and GDP per capita have complex and sometimes counterintuitive effects, access to land, agricultural employment, and capital investments all contribute positively to agricultural sustainability. The Lewbel IV method offers strong impact of SPV on electrification, independent of external factors, and its direct contribution to agricultural output, make it a compelling tool for empowering rural communities and building a more sustainable future in South Asia. Robustness of the result is validated through three approaches: measuring variable averages at three-year sub-periods, applying three-stage least squares (3SLS), and utilizing alternative methods (panel corrected standard errors (PCSE), feasible generalized least squares (FGLS)) to consider various data characteristics. Off-grid solar PV emerges as a game-changer for rural electrification and a catalyst for sustainable agricultural development in South Asia. Governments and development agencies can prioritize investments in solar PV systems to address energy poverty and boost agricultural productivity.

Green innovation: exploring the impact of environmental patents on the adoption and advancement of renewable energy

PurposeThe MENA region faces energy security and environmental challenges, necessitating the adoption of sustainable energy for sustainable development. Green innovation has emerged as a crucial factor in promoting renewable energy adoption and building an enduring and eco-friendly energy system. This research examines the influence of green innovation on clean energy adoption from 1985 to 2019.Design/methodology/approachTo ensure the robustness of the analysis, this study employs three indicators as proxies for renewable energy and develops three models that incorporate urbanization, CO2 emissions, and economic growth as control variables. Various statistical tests, including panel unit root tests, diagnostic tests, the Least Squares Dummy Variables (LSDV) method, and a Granger causality test, are utilized. In addition, the study incorporates the Augmented Mean Group (AMG) method as a robustness check.FindingsThe findings reveal a positive relationship between green innovation and the advancement of renewable energy across all models. This highlights the significance of investing in green innovation as a fundamental driver for promoting sustainable energy generation in the MENA region. The research also emphasizes the positive impact of economic growth on renewable energy development. Furthermore, urbanization contributes to the progress of renewable energy. Additionally, the study demonstrates that increased CO2 emissions are associated with higher levels of sustainable energy generation.Originality/valueThis study addresses a research gap by investigating the impact of green innovation on clean energy progress in the MENA region, an aspect overlooked in existing literature that primarily focuses on regulatory barriers. Specifically, it examines the influence of green innovation, measured through environmental-related technology patents, on sustainable energy systems in MENA. Utilizing patents as a metric offers advantages by directly assessing innovation deployment and providing broader geographical coverage.

The Effect of Education Level, Health Level, and Income Inequality on Regency/City Poverty Level in West Sumatra Province 2016-2021

The poverty rate in the province of West Sumatera is still high, the poverty rate can be seen in the statistics of the province of West Sumatera. This study analyzes several factors that influence the level of poverty in the province of West Sumatera. This study aims to analyze the effect of education level, health level and income inequality on poverty in districts/cities in West Sumatera Province in 2016-2021.This study uses panel data from 2016 to 2021 with a research sample of 19 cities / districts in West Sumatera Province. The analysis used in this research is the Fixed Effect Model (FEM) approach using Least Square Dummy Variable (LSDV).The panel regression model used in this study has tested classical assumptions, detected no multicollinearity, autocorrelation, heteroscedasticity, and normally distributed data, with an R-squared of 0.97. Based on the partial research that affects the level of poverty, namely the level of education and the level of health. Income inequality does not affect poverty levels. If viewed simultaneously or together, these variables can affect the level of poverty. Suggestions that can be submitted are that the government pays attention to the level of education, the level of public health. To the community to realize the importance of education and health in order to reduce the level of poverty. Keywords : Education Level, Health Level, And Inequality, Income Against Poverty Level

The Effects of Energy Prices on the Inflation Rate of Western Balkan Countries

The Western Balkan countries have experienced significant economic fluctuations in recent years. Among the primary contributors to these fluctuations is the volatility of energy prices. Energy, being a fundamental input in both production and consumption, has a direct and often disproportionate impact on inflation trends. Therefore, this study analyzes how energy prices have contributed to inflation in the Western Balkan (WB) countries in the period 2002 and 2022. The panel regression models, such as the fixed and random effects model as well as the Least Square Dummy Variables (LSDV), have been employed. The results reveal that there is a positive and significant relationship between energy prices and inflation. Variations in energy dependency, domestic energy policies, and economic structures lead to different inflationary responses across the Western Balkan countries. Countries with higher dependence on imported energy tend to experience more pronounced inflationary pressures.

Macroeconomic and Firm-Specific Effects on Islamic Deposits Sustainability

Integrating ESG (Environmental, Social, and Governance) principles into Islamic finance presents opportunities for aligning financial activities with sustainable and ethical considerations. While there are challenges and areas for improvement, the potential synergies and shared principles between ESG and Islamic finance provide a promising avenue for sustainable and socially responsible investment within Islamic finance. However, past studies have not thoroughly researched key aspects of Islamic finance, such as the sustainability concerns of Islamic deposits, their interaction with macroeconomic variables, and their particular impacts on firms. Therefore, this study aims to examine the macroeconomic and firm-specific effects on the sustainability of Islamic deposits. The sample in this study consists of 13 Islamic banks in Malaysia. The data period covers from 2018 until Quarter 3 of 2022. The data type is cross-sectional from secondary sources: Islamic banks' financial reports, Bank Negara Malaysia, Department of Statistics of Malaysia, and the World Bank. This study adopts a quantitative analysis approach using one dependent variable (Islamic deposits), three independent variables (gross domestic product, inflation, overnight policy rate), and one control variable (firm-specific). An estimated model using the panel data correlation and regression with the fixed effects model was conducted to test the developed hypotheses. Then, the panel data regression analysis continues with the Least Square Dummy Variable (LSDV), which includes the control variable to test the presence of the firm-specific effects. The findings show that only one macroeconomic factor, inflation, affects how well Islamic deposits are sustained. It is also evidenced by the findings that firm-specific effects impact the sustainability of Islamic deposits.

Do corporate reputation concerns constrain real earnings management practices? A multidimensional analysis

Purpose: This study integrates Eisenegger and Imhof's (EI) reputation theory and the reputation-building hypothesis to explore how corporate reputation (CREP) concerns constrain real earnings management (REM). Motivation of the study: This study empirically tests the combined and individual effects of the dimensions of Eisenegger and Imhof's corporate reputation theory on real earnings management practices. Design/methodology/approach: The study used the least-square dummy variable (LSDV) two-way fixed effects estimator on a panel data constructed from 203 non-financial firms listed in 12 sub-Saharan African stock exchanges from 2014 to 2020. Main findings: The study provides empirical evidence that CREP, consistent with Eisenegger and Imhof’s reputation theory, curtails REM practices. Functional, social, and expressive reputation concerns reduce the managerial tendency to manipulate real activities, while considering other REM influencing factors. This result is consistent across REM components, country-level analysis, and endogeneity tests. Practical implications/Managerial impact: The results of this study are anticipated to motivate the use of corporate reputation building as a preventive strategy against REM, as it deters managers from manipulating business operations. The findings provide managers with a valuable approach to evaluating a firm's various reputations and how they can be leveraged to curb REM. Novelty/Contribution: The study offers new perspectives on assessing firm reputation from various stakeholder viewpoints and how CREP serves as a complement to existing CG mechanisms to mitigate managerial opportunism.

Factors Affecting Credit Risk in Nepalese Commercial Banks

This study analyzes the factors affecting credit risk in Nepalese commercial banks. The study comprises data from 27 commercial banks from 2002 to 2020 A.D. For analysis, the Least Square Dummy Variable (LSDV) Regression for model I and Random Effect (RE) Regression Analysis for model II were performed. The effect of the independent variables on credit risk, using loan loss provision and non-performing loans, as proxies of it was examined. While comparing both models, the loan loss provisioning was found to better explain the credit risk. The growth rate of GDP, a macroeconomic variable, had a significant and positive effect on credit risk, which was unexpected whereas the control variable, the interbank interest rate, had a negative and significant effect on credit risk. Furthermore, the year dummy showed a relatively high requirement for loan loss provision, especially in the years 2019 and 2020, which may be due to COVID-19. The bank-specific variables like size, and government banks had significant and positive effects on credit risk. This implied that the merging of banks was not fruitful as it caused an increase in the total assets of banks, which would lead to an increase in the size of commercial banks. That increase in the size of commercial banks was found to increase credit risk. In addition, government-owned banks were found to have higher credit risk than other banks. The government should think about reforms through private sector participation in government-owned banks as another alternative to reduce credit risk.

FDI and Growth: A Re-look at Evidence on Developing Economies

Using cross-country data, this article investigates the impact of foreign direct investment (FDI) on growth in developing economies during globalisation. The study adopts an approach different from existing studies by categorising countries from Asia, Africa, Latin America, and the Caribbean based on FDI growth and per capita gross domestic product (GDP) growth relationship in the two phases: 1991–2004 and 2005–2019. In a sample of 29 countries, the least-squares dummy variable (LSDV) estimation shows a significant negative between FDI and per capita GDP controlling for both country-specific and time-specific effects and various other factors including gross domestic capital formation, inflation, physical infrastructure, human capital, trade openness, financial development and governance. This study confirms the positive impact of FDI in the earlier phase, while a significant negative impact on the later phase. The observed negative relationship holds for sub-sets of the sample countries for the entire period. These results are despite the importance of human capital, infrastructure, financial development, trade openness and governance along with FDI. These developing countries thus need to formulate complementary domestic economic policies, including institutional changes, which complement foreign direct investment in promoting per capita growth. JEL: F21, F43, O11, C23

Do industrialization, trade openness, and labor force participation enhance Africa’s productive capacity?

ABSTRACTWe investigated the effects of industrialization, trade openness, and labor force participation on Africa’s productive capacity. We also examined how industrialization moderates the link between trade openness, labor force participation, and productive capacity. We adopted the pooled OLS, the dynamic system GMM, and the bias-corrected least squares dummy variable (LSDV) estimators for 49 African economies between 2000 and 2018. Our findings indicate that industrialization, trade openness, and labor force participation are significantly enhancing Africa’s productive capacity. Notably, industrialization significantly moderates the positive effects of trade openness and labor force participation on productive capacity in Africa. Our results also indicate that human capital development, foreign direct investment inflow, and institutional quality are significant drivers of productive capacity, while infrastructural development and natural resource endowment have predominantly negative impacts. The policy implications of these findings include the creation of an enabling environment that promotes industrialization, international trade, and increased labor force participation.

The effect of governance on capital flows in Sub-Saharan African countries

This paper examines the effect of governance in Sub-Saharan African (SSA) countries. Specifically, this study investigates (i) the interacting impact of government efficiency, regulatory quality, and the rule of law alongside other socioeconomic variables to determine foreign capital inflow (FCI) based on each economic SSA bloc; and (ii) the characteristic drivers of FCI, impacting economic growth in the SSA countries. Descriptive statistics, static models, least square dummy variables (LSDVs) and the dynamic system general method of moment (GMM) were employed as the study’s estimating techniques. Based on the result of the LSDV, food security and the rule of law significantly impact FCI in the sub-economic blocs in the region. Only six countries across the four economic blocs responded to food security and the rule of law in the model. The dynamic system-GMM provided evidence of five socioeconomic variables and three governance variables contributing to FCI. The findings revealed (i) regulatory quality and the rule of law are governance variables that significantly impacted FCI; and (ii) food security failed to significantly impact FCI in the SSA region. However, inflation, life expectancy, the human capital index, exchange rate and gross domestic product (GDP) growth impacted FCI significantly. In the aggregate, inflation, regulatory quality, exchange rate and the human capital index exhibited positive relationships, while other variables such as life expectancy, government effectiveness and the rule of law appeared significant but inversely impacted FCI in the SSA region. The key policy implication recommendation from this study is that a good legal framework could moderate the flow of foreign capital in favour of growth as it creates a strong foundation for sustainable economic development in the region.

SPATIAL MODELING IN DATA PANELS WITH LEAST SQUARE DUMMY VARIABLE TO IDENTIFY FACTORS AFFECTING UNEMPLOYMENT IN INDONESIA

Unemployment is a serious issue that must be addressed. Unemployment has a negative impact on the national economy, making economic growth unpredictable. In 2015, Indonesia was ranked third with the highest unemployment rate in ASEAN. It is estimated that the unemployment rate in each province of Indonesia is influenced by the surrounding provinces. Therefore, spatial modelling on panel data with Least Square Dummy Variable (LSDV) is needed to identify factors that influence unemployment in Indonesia. The data used is Open Unemployment Rate (OUR) data and influencing factors are population, average length of schooling, Gross Regional Domestic Product (GRDP) rate, and Human Development Index (HDI) in 34 provinces of Indonesia from 2015 to 2020. Spatial model on panel data with appropriate LSDV for OUR data are Spatial Autoregressive Model (SAR) and Spatial Error Model (SEM). The SAR model with fixed effects has an value of 90.289%, which is greater than the SEM model with fixed effects (82.708%) and LSDV model (87.864%). The root mean square error value for SAR model with fixed effects is 0.58951, less than SEM model with fixed effects (0.78669) and LSDV model (0.65903). The best model is the SAR model with fixed effects. Based on this model, the factors that influence OUR in Indonesia from 2015-2020 are obtained, namely the rate of GRDP and HDI.

Investments, subsidies and financial constraints in Estonian agriculture

PurposeThe purpose of this study is to explore the determinants of investment decisions of Estonian farms after the transition to market economy and accession to the European Union (EU), in the period 2006–2019.Design/methodology/approachThe paper employs Estonian Farm Accountancy Data Network (FADN) individual farm-level data from the period 2006–2019, and standard and augmented accelerator investment models. Generalised methods of moments (GMM) and bias-corrected least-squares dummy variables (LSDVC) regressions were used to estimate parameters of these models.FindingsIn the considered period, farm investments were positively affected by sales growth, investment subsidies and the cash flow. Decomposition of cash flow into volatile, market income related part, and more stable, farm subsidies related part indicated that investments do not depend on market income part of cash flow. Instead, the stable part of the cash flow (farm subsidies) had a significant and positive effect on investments. This suggests that credit rationing could be present in the EU agriculture, and it depends on the farm subsidies not market income of farms.Originality/valueDespite the wealth of literature on the investment behaviour of farmers, this article is the first attempt to decompose farm cash flow into stable (farm subsidies) and volatile (market income) parts to explain the role of subsidies as a part of cash flow in credit rationing.

Behavioural antecedents of Bitcoin trading volume

This paper aims to examine the behavioural determinants of Bitcoin trading volume within a cross-country framework of 14 world economies plus the Eurozone. We introduce a basic taxonomy of behavioural indicators, distinguishing between consumer confidence, economic policy uncertainty (EPU), and indicators of financial volatility. Our estimations reveal that the Bitcoin trading volume can be predicted more accurately by EPU than by any other class of indicators. Finally, we identify the COVID-19 shock as a catalyst for a psychologically-driven Bitcoin market and find evidence that Bitcoin was a macro hedging instrument in the pandemic. To obtain our results, we conducted a panel Granger causality test, employing the Least Squares Dummy Variables (LSDV) estimator. Contrary to previous research, we found that market fundamentals (industrial production and equity market volume) became significant drivers of Bitcoin trading during the pandemic. This conclusion was preserved when we used the LSDV corrected estimator, which is more suitable for panels with a smaller time dimension. Apart from the practical implications for traders, this paper provides researchers with detailed steps for applying Granger causality testing in panel data settings.

Determinants of Indebtedness in Expanding Portuguese Hotels

The hotel industry has been one of the fastest-growing economic sectors in Portugal in recent years. According to the European Best Destinations website, Portugal has consolidated itself as a destination of excellence. The explanation of the capital structure of firms remains relevant in financial research. However, prior international empirical evidence is not exclusive and is still scarce in the Portuguese hotel sector, which motivated this research. This study aimed to analyse the influence of determinants on the capital structure of 821 Portuguese hotels between 2011 and 2019 (until the constraints of the COVID-19 pandemic affected the international tourism sector) and to determine whether strategies were conducted according to trade-off and pecking order theories. This study used an econometric approach based on the static panel data model, with tests recommending the fixed effects model estimated by the least squares dummy variables (LSDV) within. The analysed determinants were return on assets, size, tangibility, growth opportunities, risk and other tax benefits besides debt in order to explain the indebtedness through three alternative measures. The results of this research show that managers sought an optimal combination of equity and debt, which was weighted between tax savings and the cost of financial distress. However, they pursued this objective through the hierarchical sequencing of funding sources in order to minimise the costs of information asymmetry.

Does overconfidence blur out the investment efficiency? The managerial overconfidence and internal financing effect on investment efficiency: evidence from MENA region

PurposeThis paper aims to investigate whether managerial overconfidence has an impact on investment inefficiency beyond its influence on the use of internal financing or whether internal financing behaves as a full intermediary.Design/methodology/approachThe study employed three dependent variables, namely business investment scale, overinvestment and underinvestment, and analyzed data from 282 firms across five different industries listed in 11 Middle East/North Africa (MENA) countries between 2013 and 2019 using regression analysis via least square dummy variable (LSDV).FindingsThe findings indicate that while internal financing can provide funding for investment opportunities and address capital shortages, it may also result in overinvestment, particularly in companies led by overconfident managers.Practical implicationsStakeholders, including shareholders and board of directors, should pay attention to the chief executive officer (CEO)'s behavioral aspects such as overconfidence in decision-making while undertaking new investment projects. Additionally, regulators and policymakers in emerging markets like MENA should re-evaluate the corporate governance framework, devise a corporate governance index and promote boardroom gender diversity as it can significantly reduce risk.Originality/valueThis study adds to the limited research on the impact of managerial overconfidence on investment efficiency in the MENA region. By focusing on this region, which has unique economic, political and social characteristics, the study provides new insights into the role of behavioral biases in investment decision-making in emerging markets.

The Relationship Between Board Structure and Human Resource Disclosure Practices: A Study of Indian Companies

The objective of the present study is to examine the effect of board structure on human resource disclosure index (HRDI) in Indian listed companies. The present study is based on companies listed on NSE-200 Index. The final sample includes 126 companies for the period of ranging from F.Y. 2012–2013 to 2018–2019. The data of variables are collected from annual reports of the sample companies. In the analysis part, the descriptive statistics are used to check the level of human resource disclosures. After that, Pearson’s correlation matrix is applied for checking the correlation between board variables and HRDI. At last, to check the effect of board structure on HRDI, the one-way least square dummy variable (LSDV) regression model is applied. The outcomes of descriptive statistics show that the mean percentage of HRDI is 43.86. It lies on moderate side. Further, the outcomes of one-way LSDV regression model show that there is significant positive effect of board size, board meeting and audit committee on HRDI. In contrast, there is insignificant but positive effect of board independence, CEO duality on the level of human resource disclosure of the sample companies. Overall, it can be said that the human resource disclosure practice of the Indian companies is fairly good.

지역경쟁력 요인이 지역경제성장에 미친 영향: 광주전남 초광역권을 중심으로

Purpose: Recently, the legal basis for the maga-region has been established, and interest in regional competitiveness is increasing. This study examines the influence of regional competitiveness factors on the growth of the regional economy, focusing on maga-regions, in terms of corporate innovation capability, economic power base, and creative potential, and examines policy implications.
 Research design, data, and methodology: This study categorizes the maga-region and uses the time series data from 2013 to 2018 to conduct a panel analysis through the LSDV (least squares dummy variable) model based on the ultra-wide area. In particular, independent variables derive competitiveness factors from the perspectives of corporate innovation capacity, economic base, and creative potential, and analyze the effects of these regional competitiveness factors on per capita GRDP and per capita GRDP growth rate.
 Results: As a result of the analysis, the influence of regional competitiveness factors based on the Gwangju and Jeonnam maga-region on GRDP per capita is as follows. First, in the field of corporate innovation capability, knowledge performance has a positive (-) effect. Next, in the economic power sector, industrial base, manufacturing base, SOC base, and financial power were found to have a statistically significant positive (+) effect. Lastly, in the creative potential sector, the talent index and amenity index had a statistically significant negative (-) was found to be affected.
 In addition, the influence of regional competitiveness factors on the per capita GRDP growth rate based on the Gwangju and Jeonnam metropolitan areas is as follows. First, in the field of corporate innovation capability, knowledge resources have a positive (+) effect. Next, in the economic power sector, the industrial base, manufacturing base, and SOC base were found to have a negative (-) effect, and the regional financial power had a positive (+) effect. Finally, in the area of creative potential, tolerance index and talent index had a positive (+) effect.
 Implications: This study has limitations in that it analyzed the influence factors of regional competitiveness factors on regional economic growth by classifying ultra-regional regions through regional dummies in a situation where interregional cooperation has not yet been established in earnest at the ultra-regional level. It is hoped that this study will serve as a starting point for monitoring regional economic growth for ultra-wide cooperation in a situation where the institutional foundation for fostering ultra-wide areas has recently been established.

Empirical Evidence on the Relationship between Capital Structure and Organizational Life Cycle

The paper investigates the capital structure of companies listed on the Bucharest Stock Exchange (BSE) from an organizational life cycle perspective, seen as a determinant of the decisions to finance operations and growth. For this purpose, the life cycle is measured according to the cash flows patterns. Motivated by the pecking-order theory (POT) and carried out on a sample of 59 companies in the period 2010-2020, the study uses a Least Squares Dummy Variable (LSDV) panel data model and shows that listed Romanian companies resort more to bank financing in the initial stages of their life cycle. As they reach the maturity and shake-out stages, companies reorient towards internal financial resources and equity issuance, which is in line with the POT. Furthermore, the age of companies has a rather weak effect on the financial leverage, and its effect diminishes as firms age. The results also confirm the importance of having a high level of tangible fixed assets as collateral for bank loans, but also the significant role of the industry and geographical positioning on the degree of external financing.

Digital skills as an impetus for the acceleration of economic digitalization: EU perspective

Digitalization, which gained momentum peculiarly after the invention of the Internet, has had a profound impact on the shape of the economy. It has changed the way of doing business and the labor market structure (Peetz, 2019). This change has brought the rise of automatized business processes and public services which aim to eliminate human manual work but at the same time cannot be realized without humans as a main component of information and communication technology (ICT). In order to fully leverage the positive effects of human capital in digitization, individuals must possess essential digital skills. This paper highlights the importance of citizens’ ICT skills for the acceleration of the digital economy, therefore the empirical analysis conducted examines the impact of different levels of digital skills on the digitalization of the economy. Additionally, the paper investigates whether the way individuals acquire digital skills differs between highly digitalized European Union (EU) economies and other parts of the Union. In this paper, secondary data sourced from Eurostat was used. To address the research questions, the pooled ordinary least squares (OLS) and least-square dummy variable (LSDV) models were utilized as well as the t-test. The findings of the study reveal a positive impact of digital skills on the digitalization of the economy. Furthermore, significant differences in the ways citizens acquire digital skills in most digitalized economies of the EU are uncovered.

Geopolitical risk and stock market volatility: A global perspective

This paper investigates the relationship between geopolitical risk (GPR) and stock market volatility from a global perspective. We use dynamic panel data including 32 countries and regions and the bias-corrected least-squares dummy variable (LSDV) estimator. Empirical results show that GPR has a significant positive effect on stock market volatility, which is not affected by control variables. Moreover, we find that the effect of GPR on stock market volatility is more significant for emerging economies, crude oil exporters, and countries at peace. Our study provides new evidence for the relationship between GPR and stock market volatility.