GMM Method Research Articles

The Effect of Ownership Structure on Financial Reporting Timeliness: An Implementation on Borsa Istanbul

The purpose of the current study is to investigate the influence of corporate and foreign ownership structures on the timeliness of financial reporting. The sample of the study consists of 2,204 observations obtained from 208 companies trading in Borsa Istanbul between 2008 and 2019. Multiple regression analysis was conducted, and the relationship between ownership structure and financial reporting timelinesses was investigated. The findings indicate that corporate and foreign ownership are significantly and negatively associated with financial reporting timeliness. Robustness analysis was carried out using the two-stage GMM method, and it was determined that there was no endogeneity problem. The results provide valuable information for financial reporting users, such as investors, companies, regulators, policymakers, and auditors, and will aid them in their decision-making processes as it reduces information asymmetry and contributes to the improvement of the financial reporting quality.

How Does Regional R&D Investment Agglomeration Affect High-Quality Economic Development? Evidence From China

In order to reduce the environmental pollution of economic development, countries around the world pursue high-quality economic development model. However, the relationship between R&D investment agglomeration and high-quality economic development has not been thoroughly revealed in existing studies. Taking 30 provincial-level regions in China from 2009 to 2018 as research samples, this paper empirically examines the relationship between regional R&D investment agglomeration and high-quality economic development by using system GMM method and spatial econometric model. Theoretical analysis shows that regional R&D investment agglomeration promotes regional high-quality economic development by increasing regional knowledge capital, improving innovation efficiency, and promoting knowledge spillovers through scale effect, synergy effect, and spillover effect, respectively. The empirical results show that regional R&D investment agglomeration can significantly promote regional high-quality economic development. The degree of regional integrated innovation can positively adjust the promotion effect of regional R&D investment agglomeration on regional high-quality economic development. Regional R&D investment agglomeration can effectively promote the high-quality economic development of surrounding regions.

Currency substitution in a world of looming retail CBDCs: Suggestive currency substitution-based evidence

SummaryDigitalization, spurred by the pandemic, has accelerated plans by many central banks to introduce retail digital currencies (rCBDCs). If international coordination eventually allows individuals to hold digital multiple currencies this potentially implies greater scope for currency substitution. The potential to ease constraints on currency substitution dovetails nicely with the G20′s continuing aspiration to enhance digitalization as a “tool” to improve economic performance and reduce inequality. Nevertheless, as discussed in our study, opportunities for individuals and small businesses to exploit the promise of lower transactions costs thanks to digitalization will be difficult to realize in the current regulatory and geopolitical environment.Nevertheless, policy makers will not be able to make sensible choices unless they appreciate the scope for currency substitution in a world with rCBDCs. Accordingly, this paper provides new estimates of the potential for currency substitution using data from a cross-section of advanced and emerging economies. In relation to the existing literature, we apply existing econometric methodologies in novel ways to generate estimates of the degree of currency substitution conditional on technological and institutional factors. These are critical ingredients in the potential success of rCBDCs on a global scale.Our empirical study asks: What is the scope for currency substitution? It uses data from a cross-section of advanced and emerging economies, large and small, and with varying degrees of openness. First, we estimate for a panel using Generalized Method of Moments whether the degree of currency substitution differs between advanced (AE) and emerging market economies (EME). For narrow definitions of money, the answer is negative. For a broader definition of the money supply the differences are statistically significant. Indeed, the scope for currency substitution is larger for the group of emerging market economies considered.Next, we consider what happens when we think of the digitalization of money as a treatment or intervention. We estimate difference-in-difference models to estimate the possible impact on money demand using narrow and broad definitions of money. Generally, the results support those obtained using the GMM method although the size of the currency substitution effect is smaller.Important policy implications stem from our study. Since a currency is a symbol of sovereignty the scope for currency substitution estimated in this study suggests that the regulatory framework for rCBDCs is crucial as it determines how easily individuals can hold and transact digitally in different currencies across borders. One important implication is that new macroprudential tools might be needed to preserve the ability of countries to pursue independent monetary policies. Another implication is that, in a sufficiently liberal regulatory environment, cross-border holdings of rCBDCs might encourage more countries to adopt or stick to best practices in macroeconomic management and incentivize others who already do so to maintain these practices. Much will depend on whether policy makers allow markets to harness the promise of lower transactions costs and faster payments settlement.

Banking Competition, Efficiency and Stability in the MENA Region

The intensification of competition in the banking market following the adoption of financial liberalisation and deregulation policies all over the world has raised questions about their impact on the stability of the banking sectors. This study aims at participating in the continuous debate on how the competition conditions in the market affects the stability of banks in the MENA region. This study exploits a sample of 216 MENA banks operating over the period 1999-2019, and adopts the GMM method to detect the association between banking competition and stability. The empirical results show that market power has a negative effect on banking stability. This result has implications suggesting that the adverse effect of concentration on banking stability implies that regulators should be careful in pushing/encouraging banks consolidate, as this may reduce stability.

Impact of Green Banking Implementation, Financial Performance, and Covid-19 Crisis on Islamic Bank Profitability in Indonesia

The purpose of this research is to test empirically the impact of green banking implementation, financial performance, and Covid-19 crisis on Islamic bank profitability in Indonesia for the period of 2015-2021. This study uses two quantitative approaches, specifically static panel data method and dynamic panel data method (generalized method of moments or GMM). The secondary data used in this paper with a total sample of 10 Islamic commercial banks in Indonesia. This study finds that the implementation of Green Banking as the main determinant has a significant relationship to the profitability of Islamic Banks in Indonesia. The study also finds that financial performance variables such as CAR, NPF, and OEF show that contribution to the level of Islamic bank profitability in Indonesia. Further, other finding regarding the dummy crisis variable, Covid-19 crisis finds that a strong relationship to the Islamic bank profitability. It means that Covid-19 crisis will impact negatively to Islamic bank profitability in Indonesia. Based on the results of the robustness check, the model in this research is stated to be robust. The findings are expected to be useful for policy makers as well as for Islamic banking circles. Research results can be used as input in formulating policies in achieving sustainable development goals and economic and social recovery programs after the Covid-19 pandemic.

Do the Reduction of Traditional Energy Consumption and the Acceleration of the Energy Transition Bring Economic Benefits to South America?

By considering a panel dataset between 1995 and 2019 including several countries in South America and methodologically using the fixed effect and GMM methods in first differences, the authors sought to empirically determine the relationship between traditional energy consumption, renewable energy consumption, and economic growth. The results show that the two main variables studied (fossil energy consumption and renewable energy consumption) are statistically significant and contribute to economic growth per capita in all nine South American countries studied. Furthermore, it should be noted that this significance persists in the four models discussed in this study, demonstrating a link between the positive economic impact of reducing traditional energy consumption and increasing renewable energy consumption in the South American countries studied. This article also contributes to the existing literature by highlighting the fundamental role of gross capital formation, labor force participation, and tertiary school enrollment in the economic growth of these countries. Two rather small effects on the aforementioned growth are the corruption perception index and domestic lending to the private sector by banks. This paper calls on policymakers to reconsider increasing energy production using renewable sources and to promote measures for its consumption.

Are sharia bank financings in Indonesia procyclical?

Purpose – The study aims to determine whether Islamic banks' debt financing and equity financing are procyclical or counter-cyclical.Methodology – The data used in this study cover eight Islamic commercial banks and span from 2008 to 2020, thereby including 72 observations. The analysis employs the dynamic panel data model estimated using the GMM method (Generalized Method of Moments).Findings –The debt-based financing, under murabahah, salam, istishna, and ijarah contracts, did not display clear procyclical or counter-cyclical behavior. In contrast, equity financing based on mudharabah and musyarakah contracts demonstrated procyclical characteristics concerning economic fluctuation.Implications – Policymakers need to pay more attention to Islamic banks with a greater proportion of equity financing for both micro and macroprudential policy purposes since procyclicality is likely to be associated with higher risks. Similarly, Islamic banks with greater proportion of equity financing need to watch carefully the behavior of their equity financing concerning its effect on risks for the purpose of their risk management and prudential policy. Originality – This research paper fills in the absence of studies that examine which category of Islamic bank financing – debt-based or equity-based financing - is more procyclical.

Inflation Targeting As a Tool for Maintaining Price Stability of The National Bank of Ukraine

Introduction. Inflation targeting is a tool for ensuring price stability in the economy and therefore requires harmonious coordination and communication among government institutions. At the same time, the central bank must adhere to a certain policy instrument, the established legal rules, which are fixed in its mandate, or act at its discretion. Nowadays, the most common rule of monetary policy is inflation targeting.
 Aim and tasks. The purpose of the article is to explain the expediency of using the inflation targeting regime to keep inflation at a certain target level, which is determined by the central bank taking into account the current state of the economy.
 Results. The theoretical model of Taylor is considered, which is based on inflation assessment in the form of a simple interest rate rule based on monetary policy instruments that ensure convergence of the inflation forecast to the target value in the medium term. The obtained results reflect the volatility of the indicators of the objective function in the data range of 2015 Q3–2021 Q2 and confirm the weight of the gap of variable values that are estimated to be insignificant (95%). Using the GMM method, the relationship between the indicators of the objective function and their impact on the inflation rate through the use of the inflation targeting regime was verified. In particular, the volatility of variables such as the inflation gap, short-term interest rate, output gap, and exchange rate gap and their impact on the target inflation rate was revealed on the time horizon of monetary policy. Smoothing out gaps in variables is one of the goals of the central bank's reaction function under the inflation targeting regime. The use of the GMM method confirms the validity of the application of Taylor's rule regarding the feasibility of choosing an objective function with predetermined variable parameters at different sampling intervals.
 Conclusions. The increase in the volatility of variable parameters in the objective function of central banks under the inflation targeting regime is explained by global crises and the sensitivity of macroeconomic indicators to fluctuations in the economic situation. This is the main reason why central banks strictly follow the rules of monetary policy, which allow the timely smoothing of exogenous shocks in the economy.

Information and Communication Technology (ICT), Energy Volatility, and Output Volatility Nexus: A Global Panel Data Analysis

The current research contributes to the literature by evaluating the influence of Information and Communication Technology (ICT), energy volatility, and output volatility on global economies over the time period 1971-2020. The analysis was based on panel dataset for 154 nations. For empirical analysis, the study used pooled OLS, fixed effects, and random effects models including 2SLS and GMM methods. Moreover, to ensure the stability of the findings, the study ran a series of robustness analyses. The results suggested that ICT mitigates economic instability and output volatility. Energy use volatility, on the other hand, yielded considerable positive and statistically significant outcomes and augmented output volatility. This study provides important policy recommendations for implementing ICT-enabled technologies. Moreover, it is advised that the government should promote ICT technologies which result in lower volatility and protracted development of the economy.

Regional differentiation in influencing factors of clean renewable energy consumption from the perspective of air pollution prevention and control

Global economic growth is now increasingly conflicting with the sustainable development strategy. In the context of ecological environmental preservation and air pollution prevention and control, this paper probes into the regional differentiation in the influencing factors of clean renewable energy consumption. First and foremost, a brief analysis of the status quo of clean renewable consumption in China was outputted, grounded on data on the input and output of 30 provinces and cities nationwide from 2010 to 2020. Then, national and regional models are built respectively in virtue of differential GMM, systematic GMM, and bias-corrected LSDV methods. Furthermore, efforts were invested in dissecting the working mechanism of the influencing factors and verifying the previous prediction resulting in applying the Tobit regression method. For every 1% increase in the green finance index, the clean renewable energy consumption rises by 0.882 accordingly, said the regression analysis results. Last but not least, it was concluded that the development level of green finance, internet advance, and technological progress significantly positively affected clean renewable energy consumption. While the industrial structure, the degree of openness, and the level of urbanization represented by the proportion of the secondary industry play hardly-seen impact.

CSR disclosure and state ownership: implications for earnings management and market value

PurposeThis paper explores the relationship between earnings management and firms' value through the moderating effect of the missing elements – corporate social responsibility (CSR) disclosure and state ownership in Russian companies. The main argument of the paper is that CSR disclosure can be used as a mitigating mechanism to weaken the negative relationship between earnings manipulation and market value. Additionally test whether state ownership is an important moderating factor in this relationship are conducted as state has always played an important role in the emerging Russian market.Design/methodology/approachThe hypotheses are tested on panel data for 223 publicly listed Russian firms for the period 2012–2018. A number of robustness tests are used to check the obtained results for consistency. Following previous research GMM method is employed to address endogeneity concerns.FindingsSupported by stakeholder theory, it is observed that firms that disclosed more CSR information experience a weaker negative relationship between earnings management and market value because investors and other stakeholders positively evaluate a positive CSR image. This negative effect of earnings management on market value is even weaker for state-owned companies as market participants appreciate involvement of state-owned companies in CSR activities and place greater expectations on these firms to be responsible without clear understanding whether these actions are “window dressing” for this type of companies or not.Originality/valueThe study results provide new insights into the relation between earnings management, firm's value, CSR disclosure and state ownership in emerging-market firms. The paper highlight the importance of considering country-specific factors, such as state ownership, while analysing the market reaction on CSR disclosure and earnings management since the institutional peculiarities may help to explain differences in the obtained results.

The impact of older adult care policy mixes on the construction of senior centers.

The problem of an aging population is becoming increasingly serious, and the establishment of senior centers helps to promote the physical health and mental health of the older adult, a key factor in achieving the high-quality development of the old-age security industry. The government has issued a number of policies to promote the establishment and development of senior centers. However, more and more older adult care policy mixes have gradually shown the phenomenon of poor policy connection, confusing standards, and even mutually exclusive content, resulting in many problems in the construction of policy-driven senior centers. Therefore, based on the overall perspective of the older adult care policy mix, this paper uses the GMM method to explore the impact of the comprehensiveness, balance, and consistency of older adult care policy tool portfolios issued by Chinese government agencies on the construction of senior centers in China. The empirical analysis results show that a comprehensive and consistent policy mix can promote the establishment of senior centers, while the balance of the policy mix will inhibit the establishment of senior centers. This paper analyzes the impact of older adult care policy on the construction of senior centers from the perspective of the policy mix, which helps to clarify the different policy effects produced by different policy mix characteristics and provides feasible policy suggestions for the government to formulate more reasonable and effective policies.

How effective is authoritarian environmentalism？ —evidence from China

Authoritarian environmentalism (AE) in China is embedded in the historical evolution of political centralization and has obvious path dependence; however, its effectiveness lacks empirical evidence. In the light of the cognitive motivation theory and the corpus linguistics, this study uses the multigrain Chinese word segmentation algorithm to construct the will index of provincial and central governments' environmental governance. With this will index and the provincial panel data in China from 2004 to 2017, this paper systematically examines the effectiveness and spatial heterogeneity of AE with the System GMM method. First, there is a negative correlation between the central government's will for environmental governance and environmental quality in provincial administrative regions, and top–down AE, characterized by political centralization, is less effective in China. However, the interaction term coefficients between the central and provincial governments are significantly positive for environmental governance. Second, from the perspective of sub-regions, effectiveness shows spatial heterogeneity across Eastern, Central, and Western China. Third, in Chinese-style AE, the public's environmental appeal has not received sufficient attention, and people's participation in environmental governance is limited. Finally, this study discusses ways to improve Chinese-style AE in China's institutional context and political system.

The Demographic Dividend or the Education Dividend? Evidence from China’s Economic Growth

Developing countries face a significant challenge in sustaining their demographic dividend. However, there are few existing studies that approach this issue from a macroeconomic perspective or through empirical research. This paper aims to systematically analyze the impact of the demographic dividend and education dividend on economic growth. By utilizing China’s empirical evidence and employing the System GMM method, we explore how to improve both dividends. Our main findings can be summarized into three aspects. First, the demographic dividend does not depend on population size alone but also on the size of the labor force. Second, education can improve the demographic dividend and thereby prove the existence of an education dividend. Finally, the effects of the demographic and education dividends vary across regions and stages of development within developing countries. This research enriches the existing literature on education and population age in developing countries.

Impact of Direct Taxation on Economic Growth: Empirical Evidence Based on Panel Data Regression Analysis at the Level of Eu Countries

Through fiscal policy, the government can influence businesses and individuals in order to regulate their behaviour. The research used panel data from all 27 EU countries covering the period 2008–2020 to investigate the impact of direct taxation on economic growth at the level of two main clusters of countries concerning fiscal efficiency. Therefore, the analysis employed cluster methods to classify the main EU countries in both groups of countries with a high level of fiscal efficiency and those with a rather limited level of fiscal efficiency. The study employs fixed effect models and dynamic GMM methods to investigate the effect of direct taxation components (personal and corporate income taxes) on economic growth. The analysis also considers the informal economy’s role in relation to the official economy. The empirical results revealed that corporate income taxes significantly negatively impact economic growth for both clusters of high- and limited fiscal efficiency countries. Additionally, personal income tax was associated with lower economic growth for countries in the limited fiscal efficiency group. Thus, from the perspective of policymakers, lowering direct taxation can increase disposable income, stimulate consumption and economic growth, encourage investment leading to job creation, increase competitiveness, and reduce tax evasion and avoidance, thereby leading to a more efficient tax system.

Road Fatalities and Extreme Poverty in Sub-Saharan Africa: How Fatal Is It for the Breadwinners?

ABSTRACT This paper analyzes the relationship between extreme poverty and road fatalities in sub-Saharan Africa using a panel of 42 countries over the period 1990–2014. We adopt the two-step system GMM method and a two-stage estimation framework to check for robustness of the relationship between road fatalities and extreme poverty. Our study finds a positive and significant relationship between deaths from road accidents and extreme poverty for overall road fatalities and only the age group between 15 and 49 years when considering the different age groups. Extreme-poverty-road fatality elasticity post higher values when we adopt the two-stage estimation framework.

Analyzing Effects of Institutional Quality on Banking Stability: Evidence from Asean Countries

Purpose: The aim of this study is to examine the effect of institutional quality on bank stability using bank-level data from 2010 to 2020. Theoretical framework: The study considers institutions from the perspective of governance institutions. Accordingly, the concept of government institutions is related to the country's organizational foundation in terms of governance, implying institutional quality. Design/methodology/approach: The study uses GMM method and also choose the Zscore as the primary variable for bank stability. Findings: The results show that institutional quality increases the stability of banks. Moreover, with the threshold model, the results show that countries with institutional quality above the threshold will increase the stability of banks. In addition, macroeconomic and banking characteristics variables such as total assets, income diversification, quality of control, inflation, and GDP growth rate have a high significance in the model. Research, Practical & Social implications: The study shows The study's empirical results have specific policy implications for the Government in implementing policies related to institutional quality to improve bank stability. Originality/value: there are not many researches done to investigate institutional quality to improve bank stability. Moreover, from economic crisis, the matter of banking stability is among main concerns of many researches. Second, previous researches just focus on the aspect of corruption and ignore other aspects or other factors. That’s why authors conduct this research.

Asian logistics industry efficiency under low carbon environment: policy implications for sustainable development.

Logistics is a crucial part of every business. The logistics sector not only contributes significantly to Asian economies but also has far-reaching effects on ecological and social concerns. Therefore, it is important to examine the factors that can affect the logistics performance of the country. Hence, the primary objective of the study is to estimate the impact of CO2 emissions, ICT, and human capital on the logistics performance of the 20 Asian economies. In order to investigate the relationship between the variables, we have employed the OLS, 2SLS, GMM, and panel quantile regression. The estimates of CO2 emissions and GHG emissions are significantly negative in 2SLS and GMM methods, implying that environmental pollution hurt logistic performance. The estimates of ICT and education are positively significant, suggesting that increased use of internet and higher education rate are crucial in improving logistics performance. In the panel quantile regression model, the estimates of CO2, internet, and education are insignificant at most quantiles except at a few higher quantiles. Thus, governments should invest in the development of efficient logistics infrastructure to achieve sustainable development.

Driving Profitability: Exploring The Impact of Diversifying Environmentally Friendly Project Credits on Bank Performance

Green finance is a concept that combines financial and environmental aspects, focusing on sustainable and environmentally friendly investments. This research aims to examine the impact of expanding the allocation of green project loans on bank profitability. The study utilizes secondary data obtained from financial reports of banks and other financial institutions, as well as data related to green finance policies and regulations in Indonesia. The hypotheses are tested using the GMM method for data processing, with Stata17 as the main platform. The results indicate that the disbursement of green credit (GC) has a significant negative effect on the bank's Return on Assets (ROA). However, it does not have a significant influence on the Net Interest Margin (NIM). The research provides recommendations to enhance awareness and understanding of green finance through educational campaigns and training. Efforts are also needed to improve access to relevant data and information on green finance, and to strengthen collaboration among the government, financial institutions, and private sector in developing a more inclusive and sustainable green finance ecosystem in Indonesia.

Transparency on Corporate Governance and board of directors’ strategies

Based on agency and asymmetric information theories, the objective of this paper is to investigate whether the transparency on corporate governance is determined by strategies followed by the board of directors (liquidity, investment, capital structure, innovation and board composition impact on the corporate governance transparency). The study sample is composed by 826 observations from Latin American firms during the period 2004-2010 (128 unique firms). A two-way cluster standard errors and GMM methods have been adopted to perform the econometric analysis. Results suggest that corporate governance disclosure is attributable to changes on firm’s decisions made by the board with respect to financial aspects and innovation. However, the impact upon transparency of board composition with regards to female directors, independence and size of boards are attributable to industry and/or country effects. Although the main limitation of the study is focused on the period of analysis, the results provide important implications for the business sector, demonstrating that the board composition and the financial and innovation strategies adopted by the board encourage greater corporate transparency, thus increasing confidence in the markets.