Two-way Fixed Effects Model Research Articles

Digital inclusive finance and enterprise innovation—Empirical evidence from Chinese listed companies

The development of Digital Inclusive Finance (DIF) offers new opportunities for corporate innovation. This study empirically explores the influence of DIF on firms’ R&D and innovation output via a two-way fixed-effects model and an instrumental variable method using the 2011–2018 Peking University Digital Financial Inclusive Index to match city-level data of A-share listed companies. The results show that DIF plays a positive role in boosting company R&D innovation. Among the three DIF sub-dimensions, DIF coverage is the most significant in promoting R&D innovation. The role of DIF in promoting corporate R&D and innovation is most prominent for private enterprises, small and medium-sized enterprises, secondary and tertiary industries, and high-growth enterprises. In addition, DIF helps foster enterprise R&D innovation and can gratify the desire for innovation felt by adventurous business owners. Further analysis reveals that internal financing constraints and external banking competition have intermediary effects on the promotion of enterprise innovation, which are observed for the three sub-dimensions of DIF. The results of an instrumental variable regression and other robustness tests confirm the main findings.

Does Heterogeneous CSR Affect Corporate Performance?

The market rivalry and China’s ongoing economic expansion are both contributing to a gradual rise in shareholder influence over businesses. Fulfilling corporate social responsibility (CSR) is becoming more and more important to improve corporate performance, gain long-term competitive advantage and achieve sustainable development. Based on panel data of 514 listed Chinese A-share companies from 2015-2019, this study applies a two-way fixed effect model to examine the effect of CSR on corporate performance from stakeholders’ perspectives. And it also examines the mediating effect played by green technological innovation and the moderating effect of two basic corporate competitive strategies on the role of CSR in corporate performance. The study’s findings indicate that: (1) the fulfillment of CSR has a significant positive impact on corporate performance. (2) Green technology innovation plays a part in mediating the process of fulfilling CSR in promoting corporate performance. Internal CSR fulfillment enhances corporate performance by boosting investment in green technology innovation, but external CSR fulfillment enhances corporate performance by decreasing investment in green technology innovation. (3) The positive effect of CSR on corporate performance is weakened by an increase in the level of low-cost strategies, while the positive relationship between CSR and corporate performance is strengthened by an increase in the level of differentiation strategies.

The Impact of China’s OFDI on Inclusive Growth across Countries

Since the twentry-first century, deepening globalization has not only promoted the prosperity of international trade and investment and has led to many global crises. Faced with the looming threats, the Asian Development Bank first proposed the concept of “Inclusive Growth”, aiming to foster more inclusive and beneficial economic growth and reduce income disparity. As a substantial, lasting international investment, often with specific strategic purposes, FDI, especially China’s OFDI, includes not only capital investment but the provision of management, technology, and equipment, thus will affect the host countries’ pattern of economic activities and further have the consequent impact on the economy, society, and environment of the host countries. This paper uses a panel two-way fixed effects model to explore whether China’s OFDI promotes inclusive growth in host countries. It shows that China’s OFDI significantly promotes inclusive growth in host countries, and the instrumental variable method results support the findings’ robustness. Further, the heterogeneity analysis shows that the effect of China’s OFDI is mainly concentrated on coastal countries, members of the OECD, and high-income economies. This study is important for a deeper understanding of the impact of China’s OFDI on host countries’ inclusive growth worldwide.

Research on the Relationship between the Gathering of Scientific and Technological Talents and the High-Quality Development of Regional Economy—Taking Henan Province as an Example

Promoting China's economy from high-speed growth to high-quality development is an important judgment made by the 19th National Congress of the Communist Organization of China on China's economic development. Based on the panel data of 14 regions and cities in Henan Province from 2010 to 2017, this paper first calculates that the quality of economic growth in each province has spatial autocorrelation, and then uses a two-way fixed effect model to empirically test the quality of economic growth by gathering scientific and technological talents. The research results show that there is a significant positive correlation between scientific and technological talents gathering and the quality of economic growth in each city, And the level of regional economic development is the core factor affecting talent flow; Based on this, this paper puts forward relevant policy recommendations to promote the rational and orderly flow of scientific and technological talents and improve the quality of economic growth in various provinces.

How does Environment, Social and Governance Affect the Financial Performance of Enterprises?

Under the background of China’s economic structural transformation, the green and low-carbon economic development model draws the attention of politicians and academics. The low-carbon strategy provides a supportive political environment for the rapid development of ESG. However, research on the effect of ESG on enterprise financial performance is still insufficient. Using the data of A-share listed companies from 2011 to 2020, this paper examines the impact of ESG on corporate financial performance from the perspectives of ESG rating release and ESG level through Differences-in-Differences (DID) model and panel two-way fixed-effect model. Results show that the release of ESG indicators and the improvement of ESG level can significantly increase the enterprise financial performance. The role of ESG disclosure and level in promoting the enterprise financial performance is more significant in companies with less than 3 years of listing time and no Big Four audits. Furthermore, government intervention can inhibit the boosting effect of ESG on enterprise financial performance, while increased internet and marketization levels can reinforce that effect.

The Impact of ESG Rating on Stock Price Synchronization of Listed Companies: Evidence from China

To explore the latest feedback from the Chinese capital market on listed companies’ ESG evaluation, we construct a two-way fixed-effects model with a sample of Chinese A-share listed companies from 2018-2020 to empirically investigate the relationship between ESG rating and share price synchronization, and the impact mechanism is also explored from both internal and external perspectives of financial constraints and analyst attention. It is found that, a high ESG rating helps reduce the stock price synchronization, while financial constraints play a partial mediating effect and analyst attention plays a full mediating effect. In addition, the effect is more pronounced among manufacturing firms and non-SOEs. This study enriches the research related to ESG and stock price informativeness, and the findings provide important basis for the long-term benign development of ESG philosophy.

A Study on the Impact of Dynamic Visitor Demand on the Digital Transformation of Enterprises—Considerations Based on the Regional Innovation Environment and the Level of Big Data

To explore the impact of dynamic changes in tourist demand on the digital transformation of tourism enterprises, this paper starts with demand-side changes, environmental influences, and technical support, based on theories of supply and demand equilibrium, regional innovation environment, technology gaps, and comparative advantage, and conducts a multiple regression analysis using a two-way fixed effects model on data from China’s Shanghai, Shenzhen and New Third Board-listed tourism companies, as well as 31 provincial administrative regions. The study found that dynamic changes in tourist demand significantly impacted the digital transformation of tourism enterprises. In addition, the regional innovation environment and the level of big data also contributed positively to the relationship between tourist demand and the digital transformation of enterprises. For regions with different tourism resource endowments, there is heterogeneity in the impact of dynamic changes in tourist demand on the digital transformation of enterprises. Finally, recommendations for practitioners regarding the digital transformation of enterprises are provided based on this. We suggest that enterprises should pay attention to the changing needs of travelers. They should also consider the regional innovation environment and the level of big data as key resources to facilitate transformation. This will help accelerate digital transformation in tourism.

Energy saving and emission reduction effects of urban digital economy: technology dividends or structural dividends?

As a new economic form, the digital economy provides new opportunities to save energy and reduce emissions, but it may also become a booster for increasing energy consumption and pollutant emissions, making the sustainable development of cities face serious challenges. It is controversial whether the digital economy contributes to energy saving and emission reduction, and it is unclear what role technological progress and structural transformation play in the relationship between the digital economy and energy saving and emission reduction. In this study, the energy saving and emission reduction effects of the digital economy in cities and its mechanisms are empirically examined from the perspective of technological progress and structural transformation using the two-way fixed effect model and the mediating effect model. The results show that the digital economy increases urban energy consumption and reduces pollution emissions. The energy saving and emission reduction effects of the digital economy are more significant in northeastern cities, large cities, and resource-based cities. The mechanism test shows that the digital economy promotes urban energy saving and emission reduction through green technological progress, mainly because the energy saving from green technological efficiency improvements exceeds the energy rebound from green technological innovation. However, the digital economy has not shown energy saving and emission reduction effects by promoting industrial structural transformation. Specifically, the structural transformation of the secondary industry contributes to urban emission reduction, while the structural transformation of the primary and tertiary industries leads to efficiency loss of energy saving and emission reduction. Our findings provide valuable insights into the synergistic governance of "energy saving" and "emissions reduction" in cities in the digital economy.

Strategic responses to the pandemic: a case study of the US department store industry

PurposeThe study focuses on (1) the success of three strategies employed during the pandemic – two “persevering” strategies, curbside pickup and return window extension and one innovative strategy, virtual try-on technology and (2) whether the strategies are likely to be successful in the post-pandemic world.Design/methodology/approachThe authors utilize a panel dataset containing 17 department store chains in the US The panel includes weekly sales by the retailers at the city level from 2018 to 2021, encompassing both a pre-COVID-19 period and a period during the pandemic. A two-way fixed effects model, including retailer-city fixed effects and year-week fixed effects, is used to estimate department store sales.FindingsThe authors find that the two persevering strategies offset the negative impact of government-imposed containment and health measures on sales performance. On the other hand, the innovative strategy is more effective with a low level of containment and health measures, leading to our observation that virtual try-on may be more sustainable than the other two strategies in a post-pandemic environment.Originality/valueThis paper makes the following contributions: First, the authors contribute to the literature on strategies that may be used to respond to crises. Second, the authors contribute to the retail management literature, assessing the impact of the three retail strategies on department store sales. Finally, the authors compare the impact on sales of the two persevering strategies to the innovative strategy and conclude that a mix of these types of strategies may be most effective at generating short-term sales during a crisis and longer-term sales post crisis.

Equity Incentive Model, Source of Subject Matter and Enterprise Performance: Modification Effect Based on Equity Incentive Intensity

For modern enterprises, equity incentive is an important means to solve the principal-agent problem, the choice of incentive mode and the source of the incentive is an inevitable issue in the implementation of an equity incentive scheme. Based on the sample data of A-share listed companies from 2010 to 2020, this paper constructs a panel two-way fixed effect model, combining regression analysis and three interactions with differential equations (PDE), which empirically explores the relationship between two incentive models of stock option and restricted stock, the source of subject matter and enterprise performance. The study shows that the restricted stock incentive model significantly improved the performance of enterprises, and the intensity of incentives played a significant inverted U-shaped moderating role between the enterprise’s performance and the different incentive models. After adding the subject matter incentive source, it is further found that repurchase, as the source of subject matter, has a positive moderating effect on restricted stock and a negative moderating effect on stock option. The intensity of equity incentives moderates the relationship between stock option incentive models and enterprise performance when enterprises use repurchases as the source. The results of the above-given research provide some reference for enterprises to give appropriate incentive intensities, objective selection of the subject matter source under different equity incentive models based on their characteristics, and facilitation of more efficient use of equity incentive tools.

Impact of two-child policy on female employment and corporate performance: Empirical evidence from Chinese listed companies from 2010 to 2020

In 2013, the ‘Decision of the Central Committee of the Communist Party of China on Some Major Issues Concerning Comprehensively Deepening the Reform’ initiated the ‘selective two-child policy’, which allowed married couples to have two children if one of the parents was a single child. In the Fifth Plenary Session of the 18th Central Committee of the Communist Party of China in 2015, a decision was made to implement the policy that a couple can have two children; in 2016, the universal two-child policy was fully implemented. This study used female employment data disclosed by Chinese listed companies from 2010 to 2020, constructed a two-way fixed-effect model of time and industry, and empirically tested the impact of the two-child policy on female employment and corporate performance. The empirical test revealed that the higher the proportion of employed female workers, the better the firm’s performance. Expanding the scope of the two-child policy exhibited no reduction in the proportion of female employment, but weakened the positive effect of hiring female employees on corporate performance. Specifically, we found that firms with higher rates of female employment exhibit lower costs, and this low-cost effect disappears with the expansion of the scope of the second-child policy. This indicates that the economic benefits of female employment for firms result from wage discrimination. This study provides a theoretical and practical basis for safeguarding women’s reproductive and fair employment rights and promoting sustainable social development.

Study on the Impact of Environmental Tax on Industrial Green Transformation

Tax revenue is one of the essential means through which the government controls the macro-economy and plays a vital role in promoting environmental protection and sustainable development. This study takes Chinese panel data from 2004 to 2020 as sample observations, uses the SBM-GML index method to measure industrial green total factor productivity, and then uses econometric methods such as the two-way fixed effects model and instrumental variable method to analyze the impact of an environmental tax on industrial green transformation. It is found that the generalized environmental tax represented by vehicle and vessel tax, resource tax, and urban land use tax has a significant positive effect on industrial green transformation. After a series of robustness tests and the exclusion of endogeneity, this conclusion remains valid. The research shows that credit governance, the agglomeration of producer service, and their co-agglomeration with manufacturing are important adjustment mechanisms. Among them, credit management is special and compulsory, greatly restricting the environmental pollution behavior of industrial enterprises, and encourages enterprises to make green investments and to actively improve production processes.

Cultivated land loss and construction land expansion in China: Evidence from national land surveys in 1996, 2009 and 2019

Knowledge of cultivated land conservation and construction land expansion in China and its provincial scale is still insufficient due to the lack of accurate and reliable data. Based on the dataset of three nationwide land surveys in China, this study used the statistical analysis and two-way fixed effect model to explore the spatio-temporal patterns and driving forces of cultivated land and construction land change in China at the provincial and regional levels during the period 1996–2019. Results show that over the past 20 years, China's cultivated land increased first and then decreased. Distinct regional land use change characteristics were also detected, showing a continual increase in Northeast China, Inner Mongolia and Xinjiang, and a continuous decrease in eastern coastal and southwestern provinces. The center of gravity of China's cultivated land area had a trend of moving northward as a whole. Between 1996 and 2019, the area of high-quality cultivated land with slope of 2° and below in eastern China decreased by 23.33 %, while that in the three northeastern provinces and the 13 major grain producing provinces increased by 41.66 % and 11.1 %, respectively. Construction land across the country and all provinces continued to expand, and township land was expanding faster than city and village construction land. In rapidly urbanizing China, rural settlement land did not shrink but expanded rapidly, especially in the provinces of Hebei, Shandong, Henan and Sichuan where the rural population continued to decrease substantially. The mismatch between urban expansion and population growth scale was prominent. The problem of extensive and inefficient use of rural construction land is still widespread and has become more serious. Road construction has also contributed to the expansion of construction land in China. About 80 % of cultivated land loss in China was occupied by construction purposes, while the increase of construction land was driven by the expansion of built-up areas and population growth. China's land policy to control the expansion of construction land and the loss of cultivated land appears to be a double failure. The adjustment of land use planning and land policy needs to fully consider the characteristics of regional land use change, socioeconomic level and land use demand.

A comparison of the early impact of government restriction and risk perception on tourist attraction demand during the COVID-19 pandemic

ABSTRACT By collecting the daily visit data of each 5A scenic spot in China from January 1 to March 31, 2020, this paper adopted a two-way fixed-effects model to calibrate the effects of government restriction and risk perception during the pandemic. Results show that a 1% increase in government restriction level led to a 0.806% decrease in daily tourist attraction demand, while a 1% rise in individuals’ risk perception resulted in a 0.084% decline. The extent of these declines moderated by factors such as GDP, population density, urbanization rate, and attraction type. The implications of these findings are discussed.

Associations Between State TANF Policies, Child Protective Services Involvement, And Foster Care Placement.

The Temporary Assistance for Needy Families (TANF) program, which was established in 1996 and renewed in 2005, constituted a major reform of the US welfare system. Since its renewal, few studies have examined its effects on children. We used instrumental variables, two-way fixed effects, and event studies to examine the associations between state-level TANF policies, Child Protective Services involvement, and foster care placement during the period 2004-16. We found that each additional TANF policy that restricted access to benefits was associated with a 13percent reduction in TANF caseloads. Using TANF policies as an instrument, we found that increases in TANF caseloads were associated with significant reductions in numbers of neglect victims and foster care placements. In two-way fixed effects models, restrictions on TANF access were associated with more than forty-four additional neglect victims per 100,000 child population and between nineteen and twenty-two additional children per 100,000 placed in foster care. Our findings suggest that additional research using data that capture the nuances of maltreatment should be used to investigate the relationships among TANF policies, child maltreatment, and foster care placement.

Impact of technological innovation on corporate leverage in China: The moderating role of policy incentives and market competition.

Due to its capital-related nature, corporate leverage is highly exposed to financial risk, and optimizing corporate leverage is an effective method of mitigating financial risk to maximize corporate value. We use a two-way fixed effects model to examine the impact of technological innovation on corporate leverage using panel data of A-share listed companies in the Chinese manufacturing sector from 2012 to 2020. The results show that technological innovation and corporate leverage exhibit significant heterogeneity in cross-sectional, spatial and temporal dimensions. By further distinguishing between the effects of policy incentives and market competition, we find that the former exerts an "investment crowding out" effect and the latter an "innovation spillover" effect. These factors mitigate the negative relationship between technological innovation and corporate leverage. In general, this study provides empirical evidence for the rational allocation of resources by the Chinese government, the development of innovation capabilities, and the adjustment of leverage by firms from various regions.

Social trust and well-being inequality according to social stratification

Subjective well-being (SWB) has attracted a considerable amount of attention in a wide variety of research areas, and previous research has demonstrated the existence of well-being inequality according to social stratification, such as class and status. However, whether class and status have distinctive effects on SWB, even when each is controlled, and whether class and status inequalities in SWB vary depending on social trust remain ambiguous. To fill these gaps, this study focuses on both class and status—two dimensions of social stratification—to examine whether social trust affects class and status disparities in SWB. This analysis employs repeated cross-sectional international comparative data from nine waves of the European Social Survey (ESS) from 2002 to 2019 and a two-way fixed-effects model to examine the moderation effects of social trust on the impacts of the two dimensions of social stratification on SWB. Via an international comparative analysis, this study reveals that class and status have significant positive effects on SWB even after each factor is controlled and that social trust has significant moderation effects on the association between social stratification and SWB. These results indicate that the two aspects of social stratification, i.e., class and status, have differing impacts on SWB and that social trust reduces well-being inequality according to social stratification.

City size, technological innovation, and urban income inequality: Empirical evidence from China family panel studies

Cities in China are expanding and evolving innovatively at an accelerated rate. In this context, the question of whether all communities and individuals may benefit equally from urbanization and innovation merits investigation. We develop a two-way fixed-effect model employing data from the China Family Panel Studies for 2010, 2012, 2014, 2016, and 2018 to investigate the roles of city size and technological innovation in urban income inequality. In addition, we adopt a model with a mediating effect to study the impact of city size on urban income inequality by technological innovation. The empirical results are as follows: 1) urban income inequality tends to increase with city size, technological innovation, and the effect of city size on urban income inequality by technological innovation. 2) According to a regional heterogeneity test, city size has a significant impact on income inequality in western provinces and in first- and second-tier cities. Likewise, the size of non-resource-based cities has a significant impact on income inequality. Considering the potential endogeneity of city size, we devise an instrumental variable using historical population. The outcomes of a robustness test validate these findings. From the vantage point of city size and technological advancement, this research provides policymakers with a reference for lowering income inequality in urban areas.

The Impact of Agricultural Digitization on the High-Quality Development of Agriculture: An Empirical Test Based on Provincial Panel Data

To study the impact mechanism and effect of agricultural digitization on the agricultural field plays a vital role in achieving the target of high-quality agricultural development. There are three perspectives that can be taken to construct the framework of analysis as to the impact mechanism of agricultural digitization on the high-quality development of agriculture: enhancing agricultural production efficiency, optimizing resource allocation and upgrading the industrial structure. Besides, the threshold effect of the education level of the labor force is also analyzed. Based on China’s provincial panel data from 2011 to 2020, the two-way fixed effects model and threshold effect test model are applied to verify the research hypothesis. It has been discovered that agricultural digitization is conducive to promoting the high-quality development of agriculture. Heterogeneity analysis shows that agricultural digitization plays a more significant role in the eastern region than in the central and western regions. There is a single threshold effect that depends on the education level of the rural labor force in the promotion of agricultural digitization to high-quality agricultural development. When the threshold is exceeded, agricultural digitization plays a more significant role in promoting high-quality agricultural development. There are three policy suggestions made to conclude the study. The first one is to improve the construction of agricultural digitization infrastructure. The second one is to pay attention to the differences in the development degree and demand between regions in the process of agricultural digitization construction. The last one is to improve the quality of the rural labor force and the input of scientific and technological talents in the agricultural industry.

The impact of digital finance development on vertical specialization: evidence from A-share listed companies in China

PurposeThis study intends to explore the relationship between digital finance and the vertical specialization of firms. The following questions are discussed: (1) As a representative new financial development model, what is the role of digital finance in the vertical specialization of firms? (2) If digital finance improves the level of vertical specialization of firms, what is the mechanism behind such improvement? (3) How does digital finance impact the vertical specialization of firms in different regions, industries, and firms?Design/methodology/approachA two-way fixed-effect model of panel data is proposed to verify the relationship between digital finance and the vertical specialization of firms. This model is constructed by matching the city-level data of digital finance with the data of China's A-share listed companies from 2011 to 2018. Meanwhile, the instrumental variable (IV) method and difference-in-difference (DID) method are adopted to deal with the endogeneity problem of the model.FindingsThe authors' study finds that digital finance has significantly improved the level of vertical specialization of firms. The result is robust under the endogeneity consideration and a series of robustness tests. After the dimensionality of the index is reduced, the depth of digital finance usage is more conducive to the improvement of the vertical specialization of firms compared with the width of digital finance coverage and the level of financial digitization. Digital finance mainly improves the level of vertical specialization of firms by reducing transaction costs and increasing the market thickness of the intermediate products. Moreover, digital finance has certain heterogeneity in promoting the vertical specialization of firms, an effect that is more significant in the eastern region, manufacturing industry and state-owned enterprises (SOEs).Research limitations/implicationsThe first limitation is the mechanism test. This research only analyzes the mechanism from transaction cost and the market thickness of the intermediate products. With the rapid development of information technology, digital finance will be further integrated into people's production and life. There will then be more mechanisms that should be explored between digital finance and the vertical specialization of firms. Another limitation is the data sample of this paper. The conclusions of this research are based only on the data of listed companies. However, in the authors' opinion, the specialization level of small and medium-sized enterprise (SMEs) should be higher. Therefore, the conclusions of this work are underestimated, which can be considered as the lower limit of digital finance for enterprise specialization.Social implicationsAs a favorable financing channel to supplement traditional financial service functions, digital finance plays a critical role in the operating efficiency of enterprises and the effective allocation of macro resources. The authors' research shows that digital finance has significantly improved the vertical specialization of firms. This conclusion provides guides to improve the production efficiency of enterprises and the quality of economic development.Originality/valueThis paper has three main contributions. (1) The relationship between financial development and the vertical specialization of firms is innovatively discussed from the perspective of digital finance, which implies that digital finance can effectively promote the level of vertical specialization of firms. (2) This paper provides new perspectives and ideas to reveal the impact mechanism of digital finance on the real economy by systematically analyzing the mechanism of digital finance on the vertical specialization of firms from the perspectives of transaction costs and financing constraints. (3) The regional differences in the development of digital finance, industry differences in the vertical specialization of firms and differences in the nature of enterprise property rights are all under consideration, which improves the effectiveness and pertinence of digital finance in promoting the vertical specialization of firms.