Can earning much lead to doing good? Firm performance implications for corporate social responsibility

Purpose The purpose of this study is to examine the influence of firm performance on corporate social responsibility (CSR) and its possible moderating effect. Despite the significance of CSR, there remains an extensive debate about how it is affected by firm performance. Design/methodology/approach The conceptual model is mainly built on goal-setting theory. Based on archival data from multiple data sets on 1,650 companies, collected from 2010 to 2017, the hypotheses are tested using the two-stage instrumental variable regression method. Findings There is an inverted U-shaped relationship between firm performance and CSR that first increases and then decreases. In addition, considering the boundary conditions, state ownership makes the inverted U-shaped curve steeper, while high executive wage concentration makes the inverted U-shaped curve flatter. Research limitations/implications This study harmonizes the traditional contradictory findings of the influence of firm performance on CSR, that is, it supports a positive, negative or neutral relationship between the two. Originality/value This research provides a necessary structure for the CSR literature. By delving deeply into the relationship between firm performance and CSR, it enables scholars to better address the critical management question of whether earning more will lead to doing good.

Financial Literacy as a Driver of Financial Inclusion in Kenya and Tanzania

Efforts are being exerted in many developing countries to promote financial inclusion by increasing individuals’ access to financial products and services. However, literature suggests that increasing the supply of financial products and services per se may not help in expanding financial inclusion unless concerted efforts are exerted in enhancing financial literacy. This is because financially literate individuals are more likely to appreciate the value of financial services and hence take up financial products. This paper reports the link between financial literacy and inclusion using data from a demand side financial inclusion survey conducted in Kenya and Tanzania in 2016 covering a total of 6029 individuals. Results from our instrumental variable regression analysis confirmed that financial literacy is a strong driver of financial inclusion. This implies that efforts to promote financial inclusion need to be accompanied with financial literacy campaigns in both countries.

Which Factors Determine the Adoption of the Internet of Things? Impacts and Benefits

This paper provides first econometric evidence on the determinants of the Internet of Things among firms and on potential performance impacts. The analysis is based on representative firm-level data from 874 German firms. A probit model and an instrumental variable regression serve as econometric approach. The results reveal that especially collaboration platforms and B2B e-commerce increase the propensity to use the Internet of Things. The results further indicate that product innovation is highest for firms jointly using the Internet of Things and collaboration platforms while a reduction of the workforce is also highest in this case. In contrast, there is no evidence for a potential impact on sales development.

Optimal minimax rates against non-smooth alternatives

This study investigates optimal minimax rates for specification testing when the alternative hypothesis is built on a set of non-smooth functions. The set consists of bounded functions that are not necessarily differentiable with no smoothness constraints imposed on their derivatives. In the instrumental variable regression set up with an unknown error variance structure, we find that the optimal minimax rate is n−1/4, where n is the sample size. The rate is achieved by a simple test based on the difference between non-parametric and parametric variance estimators. Simulation studies illustrate that the test has reasonable power against various non-smooth alternatives. The empirical application to Engel curves specification emphasizes the good applicability of the test.

Could Palm Oil Plantation Increase Individual Expenditure? The Dutch Disease Implication in Indonesia

Indonesia is the largest palm-oil producing country, covering almost 80 percent of global production. With the extensive production capacity, this research seeks to analyze the linkages between palm oil production and its impact on the economy by the individual monthly expenditure. To reveal the connections, this research analyzes the Dutch Disease phenomenon in Indonesia, which explains how the non-tradable sector, palm-oil industry, affects the tradable sector like the manufacturing industry. The panel data variables are selected from 2011 to 2015 within 22 provinces to see the Dutch Disease's implications. As the model is suffered from the endogeneity, the correlation of explanatory variables with the error term, the research uses the Instrumental-Variable Regression method. The analysis indicates that Indonesia was not suffered from Dutch Disease. Therefore, palm oil production could increase individual expenditure. Finally, the extension of palm oil plantations could benefit Indonesia's economy without affecting other sectors.JEL Classification: E21, E24, O13, O44How to Cite:Siregar, C. D. T., & Sihaloho, E. D. (2021). Could Palm Oil Plantation Increase Individual Expenditure? The Dutch Disease Implication in Indonesia. Signifikan: Jurnal Ilmu Ekonomi, 10(1), 77-92. doi: http://doi.org/10.15408/sjie.v10i1.15831.

Confucianism and corporate fraud

PurposeConfucianism underpins Chinese traditional culture and the values of the Chinese people. The purpose of this study is to examine the relationship between adherence to Confucianism and corporate irregularities.Design/methodology/approachThe authors use the historical numbers of Jinshi (Imperial Scholars) in the Ming and Qing dynasties within 200 km of a company's location to proxy for the influence of Confucianism on the company, presenting strong evidence that Confucianism significantly reduces corporate irregularities.FindingsThe authors' findings are robust even when criticized with alternative definitions of Confucianism, sensitivity analysis and instrumental variable regression. The authors also discover that this effect is weaker in state-owned and foreign enterprises and weakened by the influence of Western culture.Originality/valueThis paper brings a new traditional-cultural perspective to the understanding of corporate irregularities and contributes to the literature on culture and finance. This paper also helps the authors understand the “China Puzzle” that is China's rapid economic development under an imperfect legal system.

Jackknife empirical likelihood: small bandwidth, sparse network and high-dimensional asymptotics

Summary This article aims to shed light on inference problems for statistical models under alternative or nonstandard asymptotic frameworks from the perspective of the jackknife empirical likelihood. Examples include small-bandwidth asymptotics for semiparametric inference and goodness-of-fit testing, sparse-network asymptotics, many-covariates asymptotics for regression models, and many-weak-instruments asymptotics for instrumental variable regression. We first establish Wilks’ theorem for the jackknife empirical likelihood statistic in a general semiparametric inference problem under the conventional asymptotics. We then show that the jackknife empirical likelihood statistic may lose asymptotic pivotalness in the above nonstandard asymptotic frameworks, and argue that this phenomenon can be understood in terms of the emergence of Efron & Stein (1981)’s bias of the jackknife variance estimator at first order. Finally, we propose a modification of the jackknife empirical likelihood to recover asymptotic pivotalness under both conventional and nonstandard asymptotics. Our modification works for all of the above examples and provides a unified framework for investigating nonstandard asymptotic problems.

Exploring Water Consumption in Dhaka City Using Instrumental Variables Regression Approaches

This paper explores water consumption in Dhaka city for better understanding of its usage, and considers the implications of findings from distributive rationale. Using 459 household survey data collected by BRAC Institute of Governance and Development (BIGD), this study estimates income elasticities of water consumption after controlling the effects of other covariates including wealth-proxies, location, household size, water bill and spatial zones using the instrumental variable regression (IVREG) and instrumental variable quantile regression (IVQREG) approaches. The latter has an additive advantage over the former as the IVQREG provides a more accurate picture of the relationship of water consumption with the income throughout the entire water consumption distribution. Using the fixed pay variable as instrument, findings reveal the strong evidence that income is endogenous. The IVQREG results show that income elasticities are heterogeneous and vary significantly across the water quantiles, implying inequality in water consumption. It also provides strong systematic evidence as income elasticity of water consumption decreases with the increase in percentile. Significant spatial inequality in water consumption from IVREG approach disappears as we use IVQREG. This also strongly supports the systematic evidence obtained. Therefore, it is imperative to introduce different tariff structures among different water consumer groups for bringing equity in water consumption and revenue generation. However, Dhaka Water Supply & Sewerage Authority (DWASA) must ensure smart water meter before implementing such tariff structure as we face severe challenges while measuring residential water consumption.

Estimating the monetary value of health and capability well-being applying the well-being valuation approach

Background Quality of life measures going beyond health, like the ICECAP-A, are gaining importance in health technology assessment. The assessment of the monetary value of gains in this broader quality of life is needed to use these measurements in a cost-effectiveness framework. Methods We applied the well-being valuation approach to calculate a first monetary value for capability well-being in comparison to health, derived by ICECAP-A and EQ-5D-5L, respectively. Data from an online survey administered in February 2018 to a representative sample of UK citizens aged 18–65 was used (N = 1512). To overcome the endogeneity of income, we applied an instrumental variable regression. Several alternative model specifications were calculated to test the robustness of the results. Results The base case empirical estimate for the implied monetary value of a year in full capability well-being was £66,597. The estimate of the monetary value of a QALY, obtained from the same sample and using the same methodology amounted to £30,786, which compares well to previous estimates from the willingness to pay literature. Throughout the conducted robustness checks, the value of capability well-being was found to be between 1.7 and 2.6 times larger than the value of health. Conclusion While the applied approach is not without limitations, the generated insights, especially concerning the relative magnitude of valuations, may be useful for decision-makers having to decide based on economic evaluations using the ICECAP-A measure or, to a lesser extent, other (capability) well-being outcome measures.