Panel regression of industrial sustainability indicators: Two-step system GMM to robust estimation

Wachira Boonyanet, Kittisak Jangphanish, Supa Tongkong

Article ID: 9035
Vol 8, Issue 15, 2024

VIEWS - 676 (Abstract)

Abstract


This study aims to scrutinize specific long-term sustainability industrial indicators in Thailand as a representative of an emerging economy. The study uses a Bloomberg database comprising all Thai listed companies on the Stock Exchange of Thailand from 2013 to 2023. The research employs a two-step Generalized Method of Moments (GMM) statistics to assess the enduring impact on industrial sustainability. These results provide consistent, significant and positive relationships between asset turnover and sales with all industrial sustainability. The results additionally reveal that some other factors may moderate industrial sustainability but reveal the GDP growth rate and institutional shareholders are less likely to be corporate sustainability to all indicators. The results provide insight into valuable guidance to management teams, financial statements’ users, investors and other stakeholders on designing effective operations and investment strategies to improve sustainability.


Keywords


sustainability; GMM estimation; financial reporting; Thailand

Full Text:

PDF


References


Aburisheh, K., Dahiyat, A., and Owais, W. (2022). Impact of cash flow on earnings management in Jordan. Cogent Business and Management, 9(1), art. no. 2135211. https://doi.org/10.1080/23311975.2022.2135211 Adrangi, B., and Kerr, L. (2022). Sustainable Development Indicators and Their Relationship to GDP: Evidence from Emerging Economies. Sustainability, 14, 658. https://doi.org/10.3390/su14020658 Ajeigbe, K.B., Swanepoel, T. and Janse van Vuuren, H. (2021). Firm’s value sustainability via accounting ratios: The case of Nigerian listed firms. Journal of Economic and Financial Sciences, 14(1), a529. https://doi.org/10.4102/jef.v14i1.529 Alarussi, Ali Saleh Ahmed (2021). Financial ratios and efficiency in Malaysian listed companies. Asian Journal of Economics and Banking, 5(2), 116-135. DOI 10.1108/AJEB-06-2020-0014 Altahtamouni, F., Alfayhani, A., Qazaq, A., Alkhalifah, A., Masfer, H., Almutawa, R., and Alyousef, S. (2022). Sustainable Growth Rate and ROE Analysis: An Applied Study on Saudi Banks Using the PRAT Model. Economies, 10(3), 70. https://doi.org/10.3390/economies10030070 Amouzesh, N., Zahra, M., and Zahra, M. (2011). Sustainable Growth Rate and Firm Performance: Evidence from Iran Stock Exchange. International Journal of Business and Social Science, 23(2), 249–255. Ang, Rui et al. (2022). The relationship between CSR and financial performance and the moderating effect of ownership structure: Evidence from Chinese heavily polluting listed enterprises. Sustainable Production and Consumption, 30, 117–129. https://doi.org/10.1016/j.spc.2021.11.030 Arellano, M., and Bond, S. (1991). Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations. Review of Economic Studies, 58(2), 277-297. Arora, L., Kumar, S., and Verma, P. (2018). The anatomy of sustainable growth rate of Indian manufacturing firms. Global Business Review, 19(4), 1050-1071. https://doi.org/10.1177/0972150918773002 Badulescu, Alina et al. (2018) The Relationship between Firm Size and Age, and Its Social Responsibility Actions—Focus on a Developing Country (Romania). Sustainability, 10, 805; doi:10.3390/su10030805 Blundell, R., and Bond, S. (1998). Initial Conditions and Moment Restrictions in Dynamic Panel Data Models. Journal of Econometrics, 87(1), 115-143. https://doi.org/10.1016/S0304-4076(98)00009-8 Blundell, Richard, Boan, Stephen and Frank Windmeijer, (2000). Estimation in dynamic panel data models: improving on the performance of the standard GMM estimator, IFS Working Papers W00/12, Institute for Fiscal Studies. Breusch, T. S., and Pagan, A. R. (1979). A Simple Test for Heteroscedasticity and Random Coefficient Variation. Econometrica, 47(5), 1287-1294. https://doi.org/10.2307/1911963 Carrera, C., and Vergara, Martínez, A. (2012). Fiscal Sustainability: The Impact of Real Exchange Rate Shocks on Debt Valuation, Interest Rates, and GDP Growth. World Development, 40(9), 1762–1783. https://doi.org/10.1016/j.worlddev.2012.04.024 Chudik, Alexander and Pesaran, M. Hashem (2013). Large Panel Data Models with Cross-Sectional Dependence: A Survey (August 9, 2013). CAFE Research Paper No. 13.15, http://dx.doi.org/10.2139/ssrn.2316333 Choi, Pual, Choa, Joung, Chung, Chune, and An, Yun (2020). Corporate Governance and Capital Structure: Evidence from Sustainable Institutional Ownership. Sustainability, 12(10), 4190; https://doi.org/10.3390/su12104190 Digdowiseiso, K. (2023). The Relationships between Current Ratio, Firm Age, Good Corporate Governance, and Corporate Social Responsibility: The Moderating Effects of Firm Size. Shirkah: Journal of Economics and Business, 8(3), 252-267. Dogan, M., and Kevser, M. (2021). Relationship Between Sustainability Report, Financial Performance, and Ownership Structure: Research on The Turkish Banking Sector. Istanbul Business Research, 50(1), 72-102. http://doi.org/10.26650/ibr.2020.50.0094 Fadilah, Fani, Uzliawati, Lia and Mulyasari, Windu (2022). The Effect of Firm Size and Firm Age on Sustainability Reporting and The Impact on Earnings Management. Jurnal Riset Akuntansi Terpadu, 15(10), 84-99. Fang, Ye, Chen, Hsing, and Tang, Jian (2018). The Impacts of Social Responsibility and Ownership Structure on Sustainable Financial Development of China’s Energy Industry. Sustainability, 10(2), 301. https://doi.org/10.3390/su10020301 Fonseka, M. M., Ramos, C. G., and Tian, G. (2012). The most appropriate sustainable growth rate model for managers and researchers. Journal of Applied Business Research, 28(3), 481-500. https://doi.org/10.19030/jabr.v28i3.6963 Fu, J., Xu, F., Zeng, C., and Zheng, L. (2022). Free Cash Flows and Price Momentum. Journal of Accounting, Auditing and Finance, 39(3). https://doi.org/10.1177/0148558X221091803 Gardner, J., McGowan, C., and Moeller, S. (2011). Using accounting information for financial planning and forecasting: An application of the sustainable growth model using Coca-Cola. Journal of Business Case Studies, 7, 9-16. Gajdosova, K. (2023). Role of GDP in the Sustainable Growth Era. SocioEconomic Challenges, 7(3), 94-112. https://doi.org/10.61093/sec.7(3).94-112.2023 Greene, W.H. (2018) Econometric Analysis, 8th Edition. London: Pearson. Hair, J.F., Black, W.C., Babin, B.J. and Anderson, R.E. (2010) Multivariate Data Analysis. 7th Edition. New York: Pearson. Higgins, R. C. (1977). How Much Growth Can a Firm Afford? Financial Management, 6(3), 7. https://doi.org/10.2307/3665251 Hinaya, A., and Ellili, N. O. D. (2021). Impact of Working Capital Management on Sustainable Performance of a Firm. Available at SSRN: https://ssrn.com/abstract=3945889 or http://dx.doi.org/10.2139/ssrn.3945889 Huang, X., and Zhang, J. (2015). Research on the financial sustainable growth of the listed companies on GEM. International Business and Management, 10, 32-37. Imhanzenobe, Japhet (2020). Managers’ financial practices and financial sustainability of Nigerian manufacturing companies: Which ratios matter most? Cogent Economics and Finance, 8(1). https://doi.org/10.1080/23322039.2020.1724241 Jensen, M. C., and Meckling, W. H. (1976). Theory of the Firm: Managerial Behaviour, Agency Costs, and Ownership Structure. Journal of Financial Economics, 3, 305-360. https://doi.org/10.1016/0304-405X(76)90026-X Kim, W, Park, Kunsu, and Lee, Sane (2018). Corporate Social Responsibility, Ownership Structure, and Firm Value: Evidence from Korea. Sustainability, 10(7), 2497; https://doi.org/10.3390/su10072497 Kutner, M. H., Nachtsheim, C. J., Neter, J., and Li, W. (2005). Applied linear statistical models. 5th Edition. Boston: McGraw-Hill. Li, J., and Lin, B. (2019). The sustainability of remarkable growth in emerging economies. Resources Conservation and Recycling, 145, 349–358. https://doi.org/10.1016/j.resconrec.2019.01.036 Lockwood, L., and Prombutr, W. (2010). Sustainable growth and stock returns. Journal of Financial Research, 33(4), 519-538. https://doi.org/10.1111/j.1475-6803.2010.01281.x Manaf, N., Saad, N., Mohamad, N., Ali, I., and Rahim, N. (2018). Determinants of sustainable growth rate (SGR) by using Zakon’s model to encounter with Shariah compliance requirements for Shariah securities compliance firms in Malaysia. International Journal of Industrial Management, 4, 61-69. Mamilla, R. (2019). A study on sustainable growth rate for firm survival. Strategic Change, 28(4), 273-277. https://doi.org/10.1002/jsc.2269 Maryana and Carolina, Yenni (2021). The Impact of Firm Size, Leverage, Firm Age, Media Visibility and Profitability on Sustainability Report Disclosure. Jurnal Keuangan dan Perbankan, 25(1), 36-47. https://doi.org/10.26905/jkdp.v25i1.4941 Menezes, D., Prata, D., Secchi, A., and Pinto, J. (2021). A review on robust M-estimators for regression analysis. Computers and Chemical Engineering, 147, 107254. https://doi.org/10.1016/j.compchemeng.2021.107254 Michael, A., et al. (2019). The Impact of GDP Growth on Achieving Sustainable Development in Ghana. International Journal of Academic Management Science Research, 3(3), 61-71. Mukherjee, T., and Sen, S. S. (2017). Sustainable growth rate: A study on some selected banks in India. Wealth, 6, 51-59. Mumu, S., Susanto, S., and Gainau, P. (2019). The sustainable growth rate and the firm performance: Case study of issuer at Indonesia stock exchange. International Journal of Management IT and Engineering, 9(12), 10-18. NasiruKaoje, Abdulsalam and Babangida, Mohammed Auwal (2020). Effect of Sales and Firm Size on Sustainability Reporting Practice of Oil and Gas Companies in Nigeria. Quest Journals Journal of Research in Business and Management, 8(1), 01-08. Nor, F. M., Ramli, N. A., Marzuki, A., and Rahim, N. (2020). Corporate sustainable growth rate: The potential impact of COVID-19 on Malaysian companies. The Journal of Muamalat and Islamic Finance Research, 17, 25-38. https://doi.org/10.33102/jmifr.v17i3.281 Park, K., and Jang, S. S. (2013). Capital structure, free cash flow, diversification, and firm performance: A holistic analysis. International Journal of Hospitality Management, 33(1), 51-63. https://doi.org/10.1016/j.ijhm.2013.01.007 Pasalao, S., Boonyanet, W., and Tongkong, S. (2024). Moderating role of board gender diversity and firm size on the relationship between free cash flow and corporate sustainability of Thai listed companies. Journal of Infrastructure Policy and Development, 8(5), 3622. https://doi.org/10.24294/jipd.v8i5.36 22 Perrings, C., and Ansuategi, A. (2000). Sustainability, growth and development. Journal of Economic Studies, 27(1/2), 19-54. https://doi.org/10.1108/EUM0000000005309 Pinto, J. E. et al. (Eds.) (2020). Equity asset valuation, 4th Edition. CFA Institute Investment Series. Hoboken: Wiley. Pham, Duc et al. (2021). The impact of sustainability practices on financial performance: empirical evidence from Sweden, Cogent Business and Management, 8(1), 1912526, DOI: 10.1080/23311975.2021.1912526 Rahim, N. (2017). Sustainable growth rate and firm performance: A case study in Malaysia. International Journal of Management Innovation and Entrepreneurial Research, 3(2), 48-60. https://doi.org/10.18510/ijmier.2017.321 Rwakihembo, John et al. (2023). Firm Age and Financial Performance: The Firm Life-Cycle Theoretical Perspective of Private Limited Companies in Uganda, International Journal of Business Strategies, 8(1), 30 – 42. Sapuan, N. M., Wahab, N. A., Fauzi, M. A., and Omonov, A. (2021). Analysing the Impacts of Free Cash Flow, Agency Cost and Firm Performance in Public Listed Companies in Malaysia. Journal of Governance and Integrity, 5(1), 211-218. Sevenfelt, Å. (2019). Scenarios for sustainable futures beyond GDP growth 2050. Futures, 111, 1–14. https://doi.org/10.1016/j.futures.2019.05.001 Stock Exchange of Thailand (SET) (2024). Sustainability at a glance. Assessed on 12 August 2024 at https://setsustainability.com/page/sustainability-at-a-glance. Tee, C. M. (2023). Executive directors’ pay-performance link and board diversity: Evidence from high free cash flow and low-growth firms. International Journal of Emerging Markets, 18(9), 2477-2500. https://doi.org/10.1108/IJOEM-11-2020-1379 Wen, R. (2017). Free Cash Flow, CEO Ability and Firm Performance. CEO Ability and Firm Performance. https://doi.org/10.2139/ssrn.2957340 Wilczyński, A., and Kołoszycz, E. (2021). Economic Resilience of EU Dairy Farms: An Evaluation of Economic Viability. Agriculture, 11(6), 510. https://doi.org/10.3390/agriculture11060510 Windmeijer, Frank (2005). A Finite Sample Correction for the Variance of Linear Efficient Two-Step GMM Estimators. Journal of Econometrics, 126, 25-51. https://doi.org/10.1016/S0165-1765(00)00228-7 Wooldridge, J. M. (2010). Econometric Analysis of Cross Section and Panel Data, 2nd Edition. Cambridge, Mass.: MIT Press. Yilmaz, Mustafa K., Aksoy, Mine and Khan, Ajab (2022). Moderating role of corporate governance and ownership structure on the relationship of corporate sustainability performance and dividend policy. Journal of Sustainable Finance and Investment, https://doi.org/10.1080/20430795.2022.2100311. Zikmund, W. G., Babin, B. J., Carr, J. C., and Griffin, M. (2012). Business Research Methods, 9th International Edition. Boston: South-Western College Publishing.



DOI: https://doi.org/10.24294/jipd9035

Refbacks

  • There are currently no refbacks.


Copyright (c) 2024 Wachira Boonyanet, Kittisak Jangphanish, Supa Tongkong

License URL: https://creativecommons.org/licenses/by/4.0/

This site is licensed under a Creative Commons Attribution 4.0 International License.