System GMM Research Articles

Capital price distortion, financial leverage, and credit risk in commercial banks

This paper uses panel data from 30 provinces and cities from 2012 to 2022 (excluding Tibet, Hong Kong, Macao, and Taiwan), and empirically examines the impact of capital price distortion and financial leverage on the non-performing loan (NPL) ratio of banks by constructing a dynamic panel system GMM model. The study finds that capital price distortion and financial leverage have a significantly positive impact on the NPL ratio of commercial banks. Increasing the degree of capital price distortion and financial leverage leads to a higher NPL ratio. Further analysis reveals that capital price distortion has a significantly positive impact on financial leverage, while Overcapacity has a significantly negative impact on financial leverage.

Does global value chain participation and position lead to innovation in an emerging economy? Industry-level evidence from Indian manufacturing industries

This study examines the relationship between global value chain (GVC) embeddedness (participation and position) and innovation performance in India using data from the TiVA database for 14 manufacturing industries over the period 2009–2018. To account for the endogeneity issue arising due to reverse causality, the study employs a two-step system GMM. Empirical results show that GVC participation and position both significantly positively affect innovation performance, measured by the number of patent applications filed. However, participation has an inverted U-shaped impact. We contribute to the existing literature by further splitting GVC participation into forward and backward participations and finding that only forward GVC participation significantly impacts an emerging country’s innovation performance. These findings suggest that policymakers in emerging countries should prioritize improving GVC position through increased R&D expenditures rather than relying solely on excessive GVC participation for enhancing innovation.

Examining the effect of geopolitical risks on renewable energy consumption in OECD countries

As urgent actions are required to accelerate the transition to a more environmentally friendly energy sector and global economy, the rising geopolitical risks defined as any tensions that disrupt the peace of local and international relations pose greater uncertainty to the rapid renewable energy deployment in supporting the carbon-neutrality ambitions. Thus, this paper investigates the influence of geopolitical risks on renewable energy consumption in OECD countries over the period 1970–2022 to address potential estimation biases from ignoring recent events such as COVID-19 and the ongoing Russia-Ukraine war. The paper applies a system GMM to a cross-country panel dataset while controlling for per capita income, carbon dioxide (CO2) emissions, economic globalization, and natural resource rents to deal with all possible sources of endogeneity. The results show that geopolitical risks reduce the consumption of renewable energy, with a magnitude of 0.22 percentage points. In addition, CO2 emissions and natural resource rents adversely affect the amount of renewable energy consumption. However, economic growth and globalization promote the demand for renewable energy. Therefore, the empirical findings suggest that geopolitical risks play a crucial role in the consumption of renewable energy. Acknowledgement The financial support from Engineering and Physical Sciences Research Council (EPSRC) under the project EP/T022930/1 is gratefully acknowledged. Authors would like to thank Prof. David Reiner and the Editor for their constructive comments and suggestions.

Retraction Note: Understanding the role of green finance and innovation in achieving the sustainability paradigm: application of system GMM approach.

Retraction Note: Understanding the role of green finance and innovation in achieving the sustainability paradigm: application of system GMM approach.

Blessings or curses? Exploring the impact of digital technology innovation on natural resource utilization efficiency in China

With the increasing resource and environmental constraints and pollution, China urgently needs to improve the condition of resource utilization. Digital technology innovation is a powerful tool for resource optimization. Therefore, this paper explores the impact of digital technology innovation on natural resource utilization efficiency (NRUE) in China from 2006 to 2019 with the system-generalized method of moments (SYS-GMM). Besides, we investigate the mechanism and heterogeneity. The main conclusions show that: (1) Digital technology innovation can significantly improve NRUE. Every 1% rise in digital technology innovation causes a 0.024% increase in NRUE; (2) digital technology innovation can indirectly improve NRUE by promoting industrial structure optimization, strengthening pollution control, and promoting green credit; and (3) heterogeneity exists in the digital technology innovation-NRUE nexus, and the effects are more obvious in digital product manufacturing and northern China. The findings enrich the existing literature and provide enlightenment for the use of digital technology to improve NRUE in China.

Unveiling energy transition strategy: A deep dive into China's ambitious renewable energy policy and its impact on carbon emission dynamics

Over the past 70 years, China has issued approximately 20,000 renewable energy (RE) policies. How to interpret China's ambitious RE strategy through these policy documents and assess its effectiveness has been a question of interest. Therefore, based on 15,603 Chinese RE policy documents from 1975 to 2022, this study employs text mining, Latent Dirichlet Allocation (LDA), Policy Modeling Consistency-Text Encoder (PMC-TE), and System-Generalized Method of Moments (SYS-GMM). It assesses the policy input intensity (PII) for different energy types, regions, and time periods, while also investigating the impact of PII about RE on carbon emissions. The study findings are as follows: (1)The PII is not uniform, with hydropower having the highest PII at 80,591, followed by solar (25,839) and biomass energy (18,903). The PII of wind (11,377) and geothermal energy (11,340) is similar, while hydrogen energy exhibits the weakest PII at 3488. (2)There are regional disparities in PII, with solar and wind energy being most prominent in northern regions, solar and hydropower being most significant in eastern regions, and wind and biomass energy aligning with local resources in southern regions. (3)RE policies have driven China's energy transition through four distinct phases. (4)Policy effectiveness varies, with solar, wind, and hydropower policies having the most significant impact on carbon emissions reduction, followed by biomass and geothermal energy. (5)China's government role in the RE strategy has shifted from a dominant role to a regulatory one.

Remittance Inflow, Investment, and Economic Growth in Africa amidst COVID-19 Pandemic

Africa has fared well in the aspect of remittance receipts in recent years; however, the region recorded a decline in remittances amid the COVID-19 pandemic which constrained the circular flow of income significantly and ultimately economic growth. In view of this, this study investigates the economic effects of remittance inflows and investment on economic growth in Africa amid COVID-19 pandemic using a panel of 48 economies and estimated with pooled OLS and two-step system GMM. The study employed two distinct approaches for estimation; pre-COVID-19 (2010–2019) and amid COVID-19 (2010–2023). The results indicate that the behavior of remittances, investment and economic growth in Africa is not significantly different between pre-COVID-19 and amid COVID-19. That is, remittances remain a significant economic growth catalyst in Africa whereas investment is not (though with growth effect potential). Overall, the study concludes that African economic policy stakeholders and other relevant policy authorities should sustain the current remittance and labor policy frameworks with possible fine-tuning where applicable while doubling their investment efforts especially in productive sectors of the economy.

Intangible Capital as a Driver of Labor Productivity in Regions and Industries: Evidence of the Spanish Case

ABSTRACTIn the last decade, many studies discussed the impact of intangible investment on firms' performance. However, comparing the effect of different types of intangible investments at regional and sectoral level is not well explored. The paper aims to fill this gap by assessing the impact of several intangible capital on labor productivity using for the first‐time updated data for the period 2000–2019. Adopting panel data techniques and system GMM, the results show that regions with higher endowments of intangible capital get higher levels of labor productivity. The study results also highlight the importance of differentiating between different sectors and types of intangible capital as they have different impact on productivity labor. In the primary sector only investments in R&D result in additional productivity gains. In the manufacturing industry, investments in R&D and software result in additional productivity gains while the service sector also increases labor productivity through other intangibles assets with innovative property such as mineral exploration, entertainment, and artistic originals.

Using social Cognitive theory to reengage dormant users in question and answer Communities: A case study of active StackOverflow participants

Online question-and-answer communities are seriously threatened by low user participation. There is currently a rare comprehensive study on the knowledge contribution pattern of consistently active participants and the moderating role of peer recognition, which can help improve low participation and reengage inactive users, despite researchers having examined the various facets of knowledge contribution and made helpful suggestions. As per the self-determination and social cognitive theory, the communal environment impacts peers and imitates role models or reliable sources in their involvement patterns. We have examined StackOverflow’s most reliable active users from 2010 to 2020 using the social cognition and self-determination theories to use the findings to reactivate dormant users. We have used a two-step dynamic system GMM model to get robust and reliable findings. The research discovered that peer repudiation, reputation, and online social interactions favorably affect the contributed knowledge. However, knowledge-seeking and earning virtual badges such as gold and bronze usually negatively impact it. Furthermore, it was revealed that the effect of virtual badges on contributed knowledge was positively moderated by peer recognition. However, peer recognition reduces the benefits of social interaction and reputation on the contributed knowledge. The study’s findings advance the body of knowledge and provide thorough management implications for raising low participation, reengaging inactive users, and cultivating a culture of innovative sharing of knowledge.

From death to birth: Do logistics parks help local renewals in logistics industry?

In the era of E-commerce and globalization, the logistics industry has become a new driving force for local economic development, with government-led logistics parks planned and constructed as a powerful policy instrument. Skeptical about whether logistics parks really take effect as expected, this paper investigates the local process of creative destruction in the logistics industry, focusing on how government-led logistics parks bridge between firm exit and firm entry during industrial renewal. Using firm-level data of third-party logistics firms in China from 2003 to 2021 and adopting system GMM estimator method, we verify that previous exit contributes to future entry but varies by the firm type and the city's importance in the regional transport network. Furthermore, we find two major roles of government-led logistics parks: (1) accelerating this process by providing the platform where various resources can be reused and reorganized into high-quality new logistics firms; and (2) prioritizing the rebirths from local existing firms over arrivals from other cities, though with some level of local protectionism. Government policies and planning decisions should maintain such function without inhibiting regional market integration.

Impact of Urbanization on Carbon Dioxide Emissions—Evidence from 136 Countries and Regions

Urbanization affects economic production activities and energy demand, as well as lifestyle and consumption behavior, affecting carbon dioxide emissions. This study constructs the System Generalized Method of Moments (Sys-GMM) model of the impact of urbanization rate on carbon dioxide emissions based on panel data of 136 countries and regions in the world from 1990 to 2020, grounded on the extended Stochastic Impacts by Regression on Population, Affluence, and Technology (STIRPAT) model. This study found that (1) there is a negative relationship between urbanization rate and CO2 emissions from 1990 to 2020. (2) The impact of the urbanization rate on CO2 emissions is heterogeneous. An increase in urbanization rate in non-OECD countries significantly reduces CO2 emissions, while the effect is not significant in OECD countries. (3) The carbon intensity of fossil energy consumption moderates the relationship between urbanization rate and CO2 emissions, weakening the effect of urbanization rate on CO2 emissions. Based on these findings, policy recommendations such as promoting urbanization and increasing the regulation and control of fossil energy carbon intensity are proposed.

Corruption and sustainability disclosure-firm performance sensitivity: an international evidence

Purpose The purpose of this study is to examine the nexus between sustainability disclosure, corruption perception and firm performance through a cross country analysis. Design/methodology/approach The study period ranges from 2014 to 2021 and the data set comprises non-financial companies across 23 nations comprising of both developed and emerging economies. This study has used a dynamic panel data model, i.e. the system generalized method of moments (SGMM) technique, to examine this issue. Findings The authors find that sustainable disclosure affects firm performance positively and corruption perception decreases the financial performance. The results explain that effective higher sustainable disclosures help to achieve control and monitor resources by reducing risk and provides strong linkages and expertise. It also affirms that corruption plays a vital role in determining financial performance of the companies. The results also reveal that corruption perception does not influence the sustainable disclosure-performance sensitivity. But in case of emerging economies, corruption reduces the influence of sustainability disclosure on financial performance of the companies. Practical implications This study has practical implications for policymakers as well as corporate managers to consider sustainable disclosure norms while framing their policies to derive maximum benefits. Originality/value This study is a new investigation that explores the intertwining relationship between sustainable disclosure, corruption and firm performance across the countries.

Revaluating the Sustainable Development Thesis: exploring the moderating influence of Technological Innovation on the impact of Foreign Direct Investment (FDI) on Green Growth in the OECD Countries

The Sustainable Development Goals (SDGs) advocate for advancing green growth, a concept that balances economic prosperity with environmental protection. At the core of this vision are principles of sustainable consumption, production, and energy usage, all aimed at mitigating climate change and safeguarding ecosystems. This study investigates how technological innovation influences the relationship between Foreign Direct Investment (FDI) and green growth in OECD member countries. Specifically, we examine two facets of green growth: production-based CO2 productivity and demand-based CO2 productivity. We employ empirical analyses using the EKC and STIRPAT framework, which includes Ordinary Least Squares (OLS), smoothed instrumental-variables quantile regression (SIVQR), and System GMM methodologies, to uncover significant insights. Our analysis reveals that FDI impedes green growth, while technological innovation is pivotal in enhancing it. This pattern holds steady across various time frames and renewable energy sources. Furthermore, our findings indicate that combining FDI and technological advancement leads to heightened production-based CO2 productivity but diminished demand-based CO2 productivity. We also identify the presence of an environmental Kuznets curve for production-based CO2 productivity. Adding to significant scientific value by demonstrating how technological innovation moderates FDI's impact on green growth in OECD countries, we advocate for fostering collaborative partnerships between foreign investors and local innovators to leverage global expertise while advancing green objectives. Additionally, policy interventions should focus on stimulating demand for eco-friendly products and services to bolster demand-based CO2 productivity.

Is the Nexus between Gender Diversity and Firm Financial Distress Moderated by CEO Duality?

This study examines the impact of gender diversity in the positions of board commissioners, executive directors, and audit committee members on the financial performance of firms experiencing financial trouble. It also evaluates whether the presence of a CEO with multiple responsibilities moderates this relationship. The analysis encompassed 224 publicly traded companies from the non-financial sector, spanning the years 2012 to 2021. The study employed the dynamic panel model system GMM to address issues of endogeneity, simultaneity, and heterogeneity in the data. The findings indicate that the presence of women on supervisory boards and in senior positions has a substantial impact. Companies with a higher number of female board members have reduced financial hardship among Malaysian listed enterprises. Female directors exhibit a greater level of caution and risk aversion while participating in management choices, which is a significant conclusion. Research indicates that the majority of financial variables are inherently endogenous, so dynamic models are better suited for analyzing the interaction between these variables. This study also presents the notable correlation between gender diversity on boards of management, CEO duality, and financial difficulty.

Navigating poverty in developing nations: unraveling the impact of political dynamics on sustainable well-being

Political instability, dismal governance, and corruption are among the factors that currently distress poverty. The primary objective of this research was to determine how political factors distress poverty in developing nations, which has perhaps not been investigated yet. The main objective was also to observe if the effect of political factors on poverty is a dilemma or a reality. Poverty (dependent variable) has been divided into two segments: income poverty index and Human Health Poverty Index; however, political factors (independent variables) studied were corruption, democracy, governance, and political globalization. Twenty-six years of data were taken from 1997 to 2022 of twenty-four developing nations. The poverty and institutional quality indices were constructed through Principal Component Analysis (PCA). The Fixed Effect, System GMM, and 2SLS approaches were used to determine the dynamic impact on poverty. Furthermore, this study incorporated fixed effects with Driscoll-Kraay standard errors to address cross-sectional dependence. The findings indicated that, although there was a significant connection between governance and income and human poverty. Democracy also showed a negative and significant relationship in the income poverty model but insignificant in the human poverty model. Political globalization showed negative and significant associations with poverty models (income and human poverty). Conversely, corruption showed a significant positive relationship in poverty models, i.e., income and human poverty.

Balancing profit and planet: The effect of corporate tax rates on environmental quality and innovation in Asian Countries

In contemporary literature, extensive research has focused on the influence of environmental taxation on the environmental performance of industrial sectors. However, it is still uncommon in the existing literature how corporate statutory tax rate (CTR) affects environmental performance. Therefore, this study aims to empirically investigate the relationship between CTR and environmental quality (ENQ) as well as environmental innovation (EIN). To conduct this analysis, we utilized 19 years of financial data spanning from 2001 to 2019 across all 48 Asian economies. Our research employed both panel quantile regression (PQR) and system GMM models for the regression analysis. The empirical findings reveal that the corporate statutory tax rate has a positive impact on CO2 emissions, leading to deterioration of the environmental quality, while simultaneously exerting a negative influence on environmental innovation, inhibiting green innovation. These effects of the CTR on ENQ and EIN remained consistent even when controlling for factors such as economic growth, foreign capital, financial development, and environmental taxation. These findings have significant policy implications, suggesting the need for a reevaluation of current tax policies and the introduction of tax rebates for companies striving to enhance their environmental sustainability. This study contributes to the literature by shedding light on the adverse consequences of high taxation on the environmental performance of businesses.

Institutional, macroeconomic and firm-specific determinants of financial leverage: the case of Vietnam

PurposeThis study aims to investigate the institutional, macroeconomic and firm-specific determinants of financial leverage in Vietnam and provides new evidence from the dynamic panel fractional estimator.Design/methodology/approachThis study uses a panel dataset of 859 Vietnamese firms from 2008 to 2022 and employs three estimators: Feasible Generalized Least Squares (FGLS), System Generalized Method of Moments (SysGMM) and Dynamic Panel Fractional (DPF), with DPF being particularly suitable for handling fractional dependent variables and the dynamic nature of financial leverage.FindingsThe results confirm the dynamic nature of the financial leverage model, with firm-specific factors, institutional factors and macroeconomic factors playing significant roles in shaping firms' financing decisions. The DPF estimator highlights the positive impact of stock market development on leverage. This study contributes to the literature by providing new evidence on the determinants of leverage in Vietnam, using the DPF estimator for more accurate estimation and revealing the significant impact of the size of the banking sector, the size of the stock market, the stock market development index, the financial development index and the corruption perception index on leverage.Originality/valueThis study contributes to the literature by providing new evidence on the dynamic nature of the financial leverage model and the impact of institutional, macroeconomic and firm-specific factors on financial leverage in the context of Vietnam. The use of the DPF estimator allows for a more accurate and reliable estimation of the determinants of leverage, considering the fractional nature of the dependent variable and the persistence of capital structure decisions over time.

Tourism and Economic Growth: Assessing the Significance of Sustainable Competitiveness Using a Dynamic Panel Data Approach

ABSTRACTThis study explores the tourism‐led growth hypothesis (TLGH) by assessing the moderating role of sustainable competitiveness across 203 countries from 2000 to 2019. Utilizing the system generalized method of moments (SYS‐GMM) approach, the analysis confirms that tourism contributes positively to economic growth, with variations observed across different income levels and degrees of competitiveness. The findings indicate that both low‐ and high‐income countries experience enhanced economic benefits from tourism when competitiveness is prioritized. The study underscores the importance of developing sustainable competitiveness strategies as a means to amplify tourism's positive effects on economic growth. These insights provide a valuable basis for policymakers aiming to leverage tourism as a catalyst for sustainable economic development across diverse national contexts.

Board of Commissioners, Chairman of Board of Directors, and Performance Audit Reports on Indonesian Banking Sector: The GMM System Approach

Board of Commissioners, Chairman of Board of Directors, and Performance Audit Reports on Indonesian Banking Sector: The GMM System Approach

Economic freedom and its subcomponents: effects on Islamic bank performance

PurposeThis paper aims to examine the profitability of Islamic banks benefits from economic freedom and its subcomponents.Design/methodology/approachThis study uses a sample of 41 Islamic banks from the Organization of Islamic Cooperation (OIC) Countries selected from 2010–2020. It conducts an empirical approach based on the System Generalized Method of Moments (SGMM).FindingsOverall, economic freedom has a substantial impact on the profitability of Islamic banks. We then investigate the relationship between the subcomponents of economic freedom and the profitability of Islamic banks. The study’s breakdown components suggest that financial and investment freedoms are favorable indicators, while business and monetary freedoms have a negative effect.Practical implicationsThis research can serve as a guideline for Islamic bank management in terms of maintaining performance. The results of this study provide policy implications for the government to offer friendly regulations for economic actors to engage in financial transactions by looking at the economic freedom sub-component.Originality/valueTo the best of the authors' knowledge, the study of the role of economic freedom in Islamic banking performance is limited, particularly in the context of OIC Countries.