Panel Fixed Effect Model Research Articles

Value relevance of cost of environmental damage

Purpose This paper aims to assess whether environmental (carbon) damage costs affect firm value and ownership. Design/methodology/approach This paper uses fixed-effects panel models and difference-in-differences design to tease out essential effects based on 69,352 sampled firm-year observations from 2004 to 2022. It uses Trucost data on the dollar cost of environmental damage at the firm level. Findings Using proprietary environmental damage costs data on US firms from Trucost, this paper finds that firm value is negatively associated with environmental (carbon) damage costs, with additional tests suggesting that the association is causal. Institutional investors increase their relative holdings following environmental shocks that reveal financial benefits to internalizing or reducing these costs. Originality/value Knowing the significance of the cost of environmental damage at the firm level is important for corporate managers, regulators and investors’ decision-making. However, this has yet to be researched. This paper contributes to the understanding of financial economics.

Corporate social responsibility and energy efficiency: Empirical evidence from the manufacturing sector of India

AbstractThe strategic business firm manages today's profitability and tomorrow's sustainability to achieve a comparative advantage in the emerging market economy. Considering India's ambitious emission reduction target and rapid economic development, this study explores the potential relationship between corporate social responsibility (CSR) and the energy efficiency of manufacturing firms in India. Using firm‐level data, the panel fixed effects model shows that CSR negatively explains energy intensity (EI). We observed a consistent negative relationship between CSR and EI for all models, with and without controlled firm‐specific variables. Firms that manufacture chemical and chemical products, pharmaceuticals, medical chemicals and botanical products are energy intensive without CSR; however, CSR activities helped these firms become energy efficient. Our result confirms that voluntary CSR is less efficient than mandatory CSR in contributing to environmental and energy‐related indicators at the firm level. Our empirical results indicate several policy implications: (1) CSR should also focus on sustainable business models related to energy efficiency and reduction in carbon emissions; (2) firms should be encouraged to use CSR related to environmentally friendly innovations. We conclude that CSR spending and environmental expenses will increase energy efficiency at the firm level, which will help achieve net‐zero targets and sustainable industrial development.

The impact of ICT development on ESG performance: International evidence

Research background: Advances in information and communications technology (ICT) have been a key factor in the transformation of economies and societies around the world. However, the impact of ICT on national ESG (environmental, social, and governance) performance has not been fully explored. Purpose of the article: This study intends to examine the relationship between ICT development and national ESG performance. In addition, this study will investigate the mechanism through which ICT development affect national ESG performance. Methods: This paper uses the panel fixed effects models with panel data from 149 countries between 2003 and 2020. The dynamic panel model is used in the robustness test. Findings & value added: The findings reveal that ICT development promotes national ESG performance through enhancing green innovation and improve human capital. Moreover, the effect of ICT development on national ESG performance is more evident in countries with higher levels of economic development, better government quality, and stronger financial development. The findings in this paper provide useful evidence and insights for countries to formulate policies to improve national ESG performance from the ICT sector.

The effects of climate change technology spillovers on carbon emissions across European countries

To unravel the challenges in the global diffusion of climate-friendly technologies, this investigation analyzes the diffusion of climate change-related technologies across countries. By using an unbalanced panel of selected European countries over the period 1990-2020, this investigation quantifies the carbon dioxide (CO2) emission effects of the diffusion of climate change-related technologies that are mediated by imports, geographical and technological proximity and free diffusion of technologies. In this study, the effects of domestic development of climate change-related technologies, population and affluence are also accounted for, and the emission effects are estimated using a fixed-effects panel model with instrumental variables. The instrumental variable for foreign technology spillovers is based on the technology support policies adopted in foreign countries. As expected, international spillovers of climate-friendly technologies are negatively linked to CO2 emissions, thus promoting emission reductions across the region. Importantly, emission reductions in Europe are more strongly influenced by international technology spillovers than by domestic innovation activities. Moreover, while all the analyzed technology diffusion channels appear relevant, the results are the most robust regarding import-mediated technology spillovers. Insights from this study support policy recommendations, especially in the trade policy context.

Enterprise digitization and marine economic performance: An empirical study of listed enterprises in China's maritime economy.

The scale and connectivity of marine resources make them more complex than land resource management. Although digitization has been recognized as an organizational change process that can effectively improve resource efficiency and enhance network resilience, however, gaps remain in establishing the theoretical links between digitization and marine economic performance. Based on a panel fixed-effects model, this study evaluates the interrelationships and potential mechanisms of different firms with data from annual reports of listed firms in the marine economy in the eastern coastal region of China. The results indicate that there is a 'U-shaped' relationship between digitalization and enterprise efficiency in the maritime sector, and significant heterogeneity exists in the characteristics of these enterprises. Notably, firms' technological innovation capability can modulate the 'U-shaped' relationship through the interaction of economies of scale and economies of scope. This paper highlights how digitization mitigates the fragmentation and sectionalization of marine information and addresses the digital overload and productivity paradox that firms may face in the early stages of digitization. The study suggests that institutional diversity shapes resilience. Governments need to promote top-down regulation and industry collaboration, while marine enterprises need to coevolve collaboratively with them through bottom-up internal communication and external interaction to enhance the value chain of marine enterprises.

Board diversity and firm performance in Chinese manufacturing firms: Moderating role of CEO duality

This study explores the relationship between board diversity and firm performance, with a focus on the moderating role of CEO duality in Chinese manufacturing firms. This study applies panel fixed-effect regression models for the period 2008–2022, and findings show that board diversity is positively associated with firm performance, and CEO duality negatively moderates the relationship. However, the findings also show that a highly diversified board can minimize the negative effect of CEO duality and increase the firm’s performance. Furthermore, the findings broaden the understanding of board attributes, showing that the education index is more evident among other board attributes for firm performance. This study verifies its results using the two-step system generalized method of moments approach and different board attributes in robust tests. The findings suggest that strategic efforts to promote board diversity may increase the board’s monitoring function and control managerial opportunism, ultimately improving firm performance in the Chinese business landscape. JEL CLASSIFICATIONS: G30; G34; L25

Corporate Digital Transformation and the Internationalization of R&D

In the context of digital transformation and economic globalization, R&D (research and development) internationalization is essential for enterprises to utilize global resources and achieve technological innovation. This study examines Chinese A-share-listed industrial companies with active overseas R&D from 2010 to 2022 using a Poisson panel fixed-effects model to assess how digital transformation influences R&D internationalization. The findings confirm that digital transformation significantly enhances the depth and breadth of R&D internationalization, even when controlling for endogeneity. The analysis identifies financing constraints and information communication efficiency as key mediators in this process. Additionally, the impact varies by the type of digital technology and the geographical location of the enterprises. This research not only deepens understanding of the link between digital transformation and R&D internationalization but also aids policy formulation for governments and businesses.

Pathways to corporate green technological innovation: An analysis from the perspective of dynamic capabilities

Green technological innovation has become a pivotal tool for driving economic restructuring and achieving environmental sustainability. However, in the face of complex and volatile market and policy environments, a critical question remains: how can enterprises effectively select and implement innovation pathways to address environmental turbulence? Drawing on data from 14,751 Chinese listed companies from 2012 to 2022, this study employs dynamic capabilities theory and a fixed-effects panel model to examine the impact of dynamic capabilities on firms’ choice of green innovation pathways. Results show a significant positive influence of dynamic capabilities on green innovation, although this effect varies depending on the research and development model and the level of environmental turbulence. Firms with high dynamic capabilities tend to favor independent research and development, with an effect coefficient of 0.778 (p<0.01); firms with moderate dynamic capabilities benefit more from cooperative research and development, with a coefficient of 0.045 (p<0.01); and firms with lower dynamic capabilities primarily pursue green innovation through technology transactions, with a coefficient of 0.052 (p<0.01). Furthermore, environmental turbulence significantly moderates the relationship between dynamic capabilities and green innovation negatively, with an interaction coefficient of -0.088 (p<0.05), indicating that environmental uncertainty weakens the positive impact of dynamic capabilities.These findings suggest that firms can select suitable research and development models aligned with their level of dynamic capabilities and adopt flexible innovation strategies to effectively manage environmental turbulence. This study proposes the following policy recommendations: enterprises should strengthen their dynamic capabilities, particularly in knowledge acquisition, resource integration, and adaptability to environmental changes, to enhance their green innovation capacity. Additionally, the government should increase policy support for green technological innovation by offering financial subsidies, tax incentives, and intellectual property protections, helping enterprises maintain their innovation momentum amid environmental turbulence.

The intermediate role of farmland transfer in the impact of digital financial inclusion on agricultural total factor productivity in China

IntroductionEnhancing agricultural productivity and promoting sustainable development in China are critical priorities, given their significant contribution to food security and rural development. However, achieving consistent agricultural productivity growth across regions and sectors has been challenging, leading to inefficiencies and environmental pressures. To address this, the potential of digital inclusive finance (DIF) as a catalyst for progress has been explored.MethodsThis study investigates the impact of DIF on agricultural total factor productivity (ATFP) through farmland transfer, with implications for rural revitalization and high-quality agricultural development. Using the HMB index method, we calculate and decompose China’s inter-provincial ATFP from 2011 to 2020. Employing the dynamic panel fixed effect model and SYS-GMM method, we empirically test the influence of DIF on agricultural productivity in relation to farmland transfer.Results and discussionOur findings reveal a slow upward trend in China’s ATFP, driven primarily by scale efficiency. Notably, a 1% increase in the general index of DIF correlates with a 0.136% increase in ATFP. We analyze the sub-classification indexes of digital inclusive finance, namely coverage breadth, depth of use, and digitalization degree. Their contributions to agricultural productivity growth are significant, with coverage breadth having the greatest impact, followed by depth of use and digitalization degree. Farmland transfer acts as a crucial intermediary, enhancing agricultural allocation efficiency and driving the relationship between digital finance and total factor productivity growth. Interestingly, the western region exhibits the highest growth rates, followed by the eastern region, while the central region shows no significant effects.ConclusionTo comprehensively enhance ATFP, aligning supply and demand for digital financial services, leveraging service depth, and guiding farmland transfer according to local conditions are essential. These findings offer valuable insights into effective strategies for maximizing the potential of DIF, promoting rural development, and achieving sustainable agricultural growth.

Research on the mechanism and path of the coupling of digital technology and environmental regulation to promote urban green efficiency

Digital technology, renowned for its embeddedness and integration, revolutionizes governance ideas, institutions, and models. Based on the panel data of 285 cities in China from 2007 to 2021, a panel vector autoregressive model (PVaR) is built to reveal the interaction mechanism between digital technology and environmental regulation. The fixed-effects panel model explored the green impact of the coupling of digital technology and environmental regulation, considering the mediating role of industrial upgrading, factor allocation, and public participation. The results show that digital technology and environmental regulation promote each other. The coupling of digital technology and environmental regulation enhances urban green efficiency, especially in economically advanced and eastern regions. Industrial upgrading, factor allocation, and public participation mediate this effect. Therefore, government departments should build ecological civilization by improving environmental management decision-making, promoting the deep integration of digital technology and environmental regulation, and exploring a new path of urban green development.

Balancing customer and employee orientations: impact on financial distress and firm value

PurposeThis paper investigates the effect of balanced orientation (BO) toward customers and employees on financial distress and firm valuation. Rooted in stakeholder theory and the attention-based theory of firms, the study aims to understand how a balanced synthesis of employee orientation (EO) and customer orientation (CO) influences the long-term market performance and survivability of firms, particularly in the context of emerging markets.Design/methodology/approachA panel dataset of the top 500 firms listed on the National Stock Exchange of India was analyzed using fixed-effect panel models with robust estimators. The Heckman procedure was employed to address selection bias. Financial data were sourced from the CMIE Prowess database and balanced orientation data were extracted from the annual letters to shareholders.FindingsThe study finds that a balanced approach to EO and CO significantly lowers bankruptcy risk and increases firm valuation. Contrary to the traditional dichotomy of EO and CO, BO emerges as a key driver in reducing financial distress and enhancing long-term market performance. Firms embracing multiple strategic orientations outperform those solely focused on customer orientation.Practical implicationsFor emerging market firms facing resource constraints, developing BO is challenging but crucial. This study suggests adopting a sequential or alternating approach to developing EO and CO, which can alleviate bankruptcy risk and improve market valuation even in competitive environments.Originality/valueThis paper contributes to the existing literature by empirically demonstrating the significance of BO in emerging markets. It offers a novel perspective on strategic management, highlighting the importance of balancing customer and employee needs, especially in resource-constrained environments.

The Impact of Employee Stock Ownership Plans on Capital Structure Decisions: Evidence from China

The determination of the capital structure is a critical component of a company’s financial decision-making process. The question of how to optimize a firm’s capital structure to increase its value has been a significant topic of interest within the financial community. The employee stock ownership plan (ESOP) has developed rapidly in China’s capital market over the past decade, providing a suitable context for studying the impact of employee equity incentives on capital structure decisions. This paper employs cross-sectional ordinary least squares regression models and unbalanced panel fixed effect models to investigate the impact of employee stock ownership plans (ESOPs) on firms’ capital structure decisions. The analysis is conducted on a sample of Chinese A-share listed companies on the Shanghai and Shenzhen Stock Exchanges. The research considers both static capital structure choice and dynamic capital structure adjustment. We find that the implementation of an ESOP reduces the level of corporate debt and accelerates the dynamic adjustment of capital structure, suggesting that employee equity incentives play a role in optimizing firms’ capital structure decisions. We also find that the impact of ESOPs on the dynamic adjustment of capital structure is asymmetric. Specifically, the implementation of ESOPs markedly accelerates the downward adjustment of capital structure, yet has no impact on the upward adjustment of capital structure. Further analysis demonstrates that the impact of ESOPs on capital structure decisions is contingent upon the macroeconomic environment, industry characteristics, corporate governance, and ESOP contract designs. First, the optimization of ESOPs on capital structure decisions is more pronounced in an economic boom environment, in a poor market climate, or in competitive industries. Second, the reduction effect of ESOPs on corporate debt is more pronounced in non-state-owned companies, high-tech companies and those with lower ownership concentration. In contrast, the acceleration effect of ESOPs on capital structure adjustment is more pronounced in state-owned companies, non-high-tech companies and those with higher ownership concentration. Ultimately, ESOPs financed by loans from a firm’s major shareholders—or with a longer lock-up period, smaller shareholding size or executive subscription ratio—demonstrate a more pronounced optimization effect on capital structure decisions. This paper not only contributes to the existing literature on the relationship between equity incentives and capital structure decisions, but also provides guidance for listed companies on the reasonable design of their ESOPs and the optimization of their capital structure decisions.

How the digital economy enhances the grain supply chain resilience in China: exploring the moderating effects of government innovation-driven

IntroductionEnsuring food security in the new development paradigm urgently requires increasing the grain supply chain resilience. In order to clarify how can significantly enhance grain supply chain resilience, to demonstrate the relationship between the digital economy, government innovation-driven and grain supply chain resilience is necessary. To specify how the government can effectively perform its macro-regulatory functions, the government innovation-driven is reflected by government innovation-driven planning and government innovation-driven investment, respectively.MethodsThe data of 31 provinces in China from 2011 to 2021 have been used. The panel fixed effects model, moderating effects model and threshold effects model have been selected to analyze.ResultsDigital economy has a stronger enhancement effect on grain supply chain resilience; Government innovation-driven has an increased moderating effect on digital economy enhance grain supply chain resilience; The enhancement effect of digital economy and the moderating effect of government innovation-driven are differentiated between China’s functional zones of grain production; And the threshold effect of government innovation-driven planning shows a process of digestion and absorption, which accumulating to 0.018 will emerge a multiplier effect. Government innovation-driven investment is higher than 0.026, which can have a promoted moderating effect.DiscussionTo expand the depth of integration of the digital economy, accurately government innovation-driven, the focus should be on attracting innovative talent, who can construct the perpetual motion machine mode of “external promote + internal drive,” so as to strengthen the robustness of the grain supply chain.

How does new-type urbanization promote green development efficiency in China? The mediating role of governments, enterprises, and residents

New-type urbanization (NTU) is proposed by China to solve unsustainable issues and improve green development efficiency (GDE) during the process of rapid urbanization. However, the impact mechanism of NTU on GDE is unclear. Using panel data of 282 prefecture-level cities in China from 2010 to 2019, we measured NTU and GDE to describe their spatiotemporal pattern and relationship evolution. The fixed effects panel model and mediating effect panel model were further utilized to analyze the benchmark impact, mediating mechanism and spatiotemporal heterogeneity of NTU on GDE. The results showed that NTU improved whose level in eastern region was the highest, while GDE increased in fluctuations whose level in eastern and western regions performed better. With the proportion of double-high cities increasing from 13.83% to 43.62%, the NTU-GDE relationship was upgraded. Overall, every 1% improvement in NTU increased GDE by 0.3111%, and the enterprise effect, resident effect and government effect played a positive mediating role from high to low. During the later stage of NTU, it improved GDE more strongly and the mediating role of governments was optimized. The eastern region was the only region with three positive mediating roles of governments, enterprises and residents. These findings will facilitate GDE through NTU in China and have reference significance for the sustainability of global urbanization.

An analysis of how digital technology impacts trade costs—Based on the empirical data of RCEP member countries

<p class="MsoNormal" style="margin-top: 12pt; text-align: justify;"><span lang="EN-US" style="font-family: 'times new roman', times, serif; font-size: 14pt;">This paper explores how digital technology reduces trade costs using bilateral trade data from RCEP member countries and a panel fixed effects model. The findings show that digital technology significantly lowers trade costs, a conclusion that holds even after accounting for lag effects and various robustness checks. The impact of digital technology on trade costs follows an inverted U-shape: the effect is most significant in the current period, especially with a one-period lag, and diminishes over time. Larger economies and higher export levels strengthen this negative impact due to their reliance on exports and continuous improvements in domestic digital technology. The study recommends investing in digital infrastructure, formulating reasonable internet access policies, supporting digital skills development, and enhancing digital connectivity to bridge the digital divide, thereby promoting trade facilitation and efficiency.</span></p>

Study on how the digital economy affects urban carbon emissions

The digital economy is crucial in advancing an economically sustainable and low-carbon future and plays a key role in achieving carbon neutrality and carbon peaking. We measured the digital economy development level of each prefecture-level city in China form 2011to 2019, then investigated the impact of on carbon emissions and its mechanism using the panel fixed effects model and the spatial Durbin model. Our results indicated that: Firstly, an inverted U-shaped relationship had been observed between the impact of digital economy on carbon emissions, which increased and then decreased, and this result was again verified by a threshold regression. Secondly, there was a nonlinear relationship between digital economy and green innovation and the digital economy had an indirect effect on carbon emissions through green innovation. Thirdly, the influence of digital economy on carbon emissions in the area followed an inverted U-shaped relationship that stimulated initially and then restrained, with spatial spillover effects. Fourth, the heterogeneity analysis found that digital economy had a greater emission reduction effect in areas east of the "Hu Huanyong line" and in in cities without resources. The conclusions provide new highlights on the relationship between digital economy and carbon emissions, along with policy recommendations for attaining the objectives of peak carbon and carbon-neutral strategies.

Foreign direct investment, environmental regulation, and energy transition—An empirical study based on data from 38 OECD countries worldwide

AbstractThis study formulates a theoretical hypothesis regarding the intricate interplay among foreign direct investment (FDI), environmental regulation, and energy transition. To empirically validate this hypothesis, a comprehensive analysis is carried out on 38 member nations of the Organization for Economic Cooperation and Development (OECD) over the span of 2003 to 2020, utilizing a panel fixed effects model, a panel quantile model, and a panel threshold regression model. The findings of the research indicate that (1) FDI exhibits an inhibitory impact on energy transition and, according to the heterogeneity analysis, FDI significantly inhibits energy transition in developed nations. However, the inhibitory influence on energy transition in developing nations is not as pronounced. (2) A considerable amount of dampening influence is exerted by FDI on energy transition at various stages of the transition and is most apparent when the transition is in the growth phase. (3) A threshold effect is evident in FDI and environmental regulation in relation to energy transition owing to the mismatch between the two developments. Notably, the influence of FDI on energy transition significantly varies based on the stringency of environmental regulation. As formal environmental regulation surpasses a designated threshold, FDI shifted from facilitating to inhibiting the energy transition. The same conclusions were reached when informal environmental regulation was considered as the threshold variable. Drawing from the conclusions of this paper, the countries of the OECD can develop a theoretical framework to formulate foreign investment introduction policies and regulate environmental regulation efforts to promote the energy transition.

The Impact of Air Pollution Information on Individuals' Exercise Behavior: Empirical Study Using Wearable and Mobile Devices Data.

Physical exercise and exposure to air pollution have counteracting effects on individuals' health outcomes. Knowledge on individuals' real-time exercise behavior response to different pollution information sources remains inadequate. This study aims to examine the extent to which individuals avoid polluted air during exercise activities in response to different air pollution information sources. We used data on individuals' exercise behaviors captured by wearable and mobile devices in 83 Chinese cities over a 2-year time span. In our data set, 35.99% (5896/16,379) of individuals were female and 64% (10,483/16,379) were male, and their ages predominantly ranged from 18 to 50 years. We further augmented the exercise behavior data with air pollution information that included city-hourly level measures of the Air Quality Index and particulate matter 2.5 concentration (in µg/m3), and weather data that include city-hourly level measures of air temperature (ºC), dew point (ºC), wind speed (m/s), and wind direction (degrees). We used a linear panel fixed effect model to estimate individuals' exercise-aversion behaviors (ie, running exercise distance at individual-hour, city-hour, or city-day levels) and conducted robustness checks using the endogenous treatment effect model and regression discontinuity method. We examined if alternative air pollution information sources could moderate (ie, substitute or complement) the role of mainstream air pollution indicators. Our results show that individuals exhibit a reduction of running exercise behaviors by about 0.50 km (or 7.5%; P<.001) during instances of moderate to severe air pollution, and there is no evidence of reduced distances in instances of light air pollution. Furthermore, individuals' exercise-aversion behaviors in response to mainstream air pollution information are heightened by different alternative information sources, such as social connections and social media user-generated content about air pollution. Our results highlight the complementary role of different alternative information sources of air pollution in inducing individuals' aversion behaviors and the importance of using different information channels to increase public awareness beyond official air pollution alerts.

Economic Growth through Rent Streams, Financial Development and Institutional Quality in Mena

This study examines the relationships between natural rent streams, financial development, institutional quality, and economic growth in the Middle East and North Africa (MENA) region and is the development of fixed effects panel models during 1990–2020. The analysis of the MENA region sheds light on the complex, dynamic nature of the region’s economies and societies, as this region is an interesting case study where economic, political and cultural dynamics are diverse. The region faces economic diversification needs, conflicts, migration, and climate change, making this study timely and relevant. To this end, fixed effects regressions and scenario approaches were applied to the collected panel data. The findings reveal natural resource rents as the primary driver of economic growth, their effectiveness dependent on financial development and institutional quality levels. A well-developed financial sector facilitates efficient channeling of rents into productive investments, while strong institutions mitigate resource curse effects. In contrast, while remittances and foreign aid do not directly impact growth, their effectiveness is enhanced by financial development and institutional frameworks. The results highlight the critical roles of financial sector development, institutional quality, and robust governance in shaping the impacts of resource rents in this resource-rich region. The policy recommendations emphasize strategies for managing resource wealth, strengthening financial systems, promoting inclusion, improving institutions, and fostering an enabling environment for remittances and foreign aid to promote sustainable economic growth.

Corporate “dash-for-cash” amidst the Covid-19 Pandemic: Evidence from an Emerging Economy

This paper seeks to examine the impact of Covid-19 pandemic on corporate cash holding. The research collects data from 531 listed Vietnamese firms for the period 2020Q1-2021Q1. The data are analyzed using panel Fixed Effect model. Results show that corporations hoard more cash in response to the Covid-19 pandemic. This can be attributed to firms’ precautionary purpose and investment delays to a limited extent. Firms’ increased cash holdings are channeled through conservative payout policy. The results further reveal that hoarding cash amid the pandemic alleviates the adverse impacts of the Covid-19 outbreak on investment. Previous studies identified various determinants that affect firms’ cash holding. Our study adds another critical factor, a rare disaster, as an important determinant of corporate cash policy.