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In the early days of the COVID-19 pandemic, an area could only report its first positive cases if the infection had spread into the area and if the infection was subsequently detected. A standard probit model does not correctly account for these two distinct latent processes but assumes there is a single underlying process for an observed outcome. A similar issue confounds research on other binary outcomes such as corporate wrongdoing, acquisitions, hiring, and new venture establishments. The bivariate probit model enables empirical analysis of two distinct latent binary processes that jointly produce a single observed binary outcome. One common challenge of applying the bivariate probit model is that it may not converge, especially with smaller sample sizes. We use Monte Carlo simulations to give guidance on the sample characteristics needed to accurately estimate a bivariate probit model. We then demonstrate the use of the bivariate probit to model infection and detection as two distinct processes behind county-level COVID-19 reports in the United States. Finally, we discuss several organizational outcomes that strategy scholars might analyze using the bivariate probit model in future research.

This study aims to combine two fraud-related streams of the literature on guanxi and overconfidence into an integrated framework, which is the fraud triangle, to interpret the mechanism of fraud commission and detection.

A bivariate probit model with Partial Observability (POBi Probit) is applied. Moreover, the POBi Probit model is adjusted to the Chinese context. The China-specific POBi Probit model is constructed using data of Chinese A-share listed companies from 2008 to 2014, with a total of 15,109 firm-year observations.

Overconfidence induces fraud commission and worsens fraud detection; overconfidence mediates the relationship between fraud and guanxi; the “white side” of guanxi comes from alumni networks, while the “dark side” is derived from relatives-based networks; overconfidence induces fraud commission in accounting and disclosure and benefits the detection of disclosure frauds. Guanxi suppresses fraud commission in management and disclosure, however, it worsens fraud detection given fraud in management and disclosure; overconfidence induces fraud commission in both state-owned enterprises (SOE) and non-SOEs, and benefits fraud detection in SOEs. Guanxi suppresses fraud commission and worsens fraud detection in SOEs and city-owned firms.

There are two drawbacks of the partial observable bivariate probit (POBi-Probit) method that must be mentioned here. On one hand, the ex ante variable selection is one of the most difficult parts of applying the POBi-Probit model and different variables are included in different studies. On the other hand, the POBi-Probit model might not converge if too many variables are included. Thus, many widely accepted factors can be included in the model. Thus, this study initially sets the POBi-Probit model based mainly on Khanna et al. (2015) and then adjusts the model for the Chinese context (e. g. considering government ownership) according to Yiu et al. (2018) and Zhang (2018) and the local study of Meng et al. (2019). Considering the observability of fraud, on one hand, the observability of fraud commission is a widely accepted limitation, especially when accounting opacity comes across with regulatory efficiency (Yiu et al. (2018). On the other hand, the observability of relationships is another obstacle to this study. Future studies can go further by revealing the presently unobservable relationships using Big Data technology.

This paper theoretically and practically contributes to the literature on both corporate fraud and corporate governance. Theoretically, by introducing integrated principal-agent resource-reliance theory (IPRT) and upper echelon theory (UET), this paper broadens the framework of fraud triangle theory (FTT) and testifies the availability of the broaden FTT in the transitional and emerging-market context of China. Practically, this paper provides evidence that guanxi and overconfidence are two of the factors affecting corporate fraud. Thus, this paper provides a governance approach opposing corporate fraud in China, which may help the other emerging economies in transition.

This paper explored factors that impact insurance choices of demand (farmers) and supply (insurance companies) side, respectively.

Specially designed survey questions allow one to fully observe the demand tendency from farmers and partially observe the supply tendency from insurance companies. Using bi‐vairate probit model, a joint estimation of insurance decisions of both supply and demand sides suggested that factors perform different roles in affecting insurance participation.

Farmer's age and education have positive impacts on insurance demand, but are indifference to insurance providers. Insurance suppliers care about farmers' experience in the fields when providing insurance services, however, on the demand side, farmers' experience occasionally results in overconfidence and hence, impedes farmers' insurance purchasing. Production scales, proxy by sow inventory, are put more weight by farmers than insurance suppliers when making decisions. Production efficiency measures perform as incentives for farmers to purchase insurance. While suppliers prefer customers who use vaccine, farmers tend to treat vaccine as a substitute for insurance to prevent disease risk.

Results from bi‐vairate probit model offer deeper understandings about livestock insurance choices and provide further insights to improve policy design and promote participation.

The study designed a special questionnaire and firstly used bi‐vairate probit model to offer more understandings about demand and supply sides of livestock insurance.

In the presence of credit rationing the poor are unable to exploit growth‐promoting opportunities. Using data gathered from a household survey on North China Plain, the purpose of this paper is to find pervasive rationing in the highly regulated formal credit market in rural China. The subsidized credit policies favor local elites instead of the targeted poor strata and earmarked credit programs are less effective. By jointly estimating credit rationing in both the formal and informal sectors, this paper elaborates on the fragmented rural credit market in China where different borrower segments are systematically sorted out across different loan types. Non‐targeted credit programs cannot address income redistribution or sustainable poverty reduction in the presence of such skewed equality and equity.

The basis of this study is a multi‐topic household survey data on rural households in the North China Plain, with 337 rural households being randomly sampled out of five purposely selected counties. The particular objectives are to identify the determinants of credit rationing in both formal and informal sectors, to show the extent of credit rationing by using Probit model, to explore the substitutability of institutional and informal lending by using bivariate probit specification.

First, there exists pervasive rationing in the highly regulated formal credit market in rural China. Second, the subsidized credit policies favor local elites, instead of the targeted poor strata; and the earmarked credit programs are less effective. Third, informal credits, in a form of reciprocal arrangement, are weak substitutes for institutional loans. Different segments of borrowers are systematically sorted out across different loan types; the rural credit market is fragmented. Fourth, government‐led credit programs are not effective in promoting agricultural investments; credits of rural non‐farm activities facilitate agricultural transformation.

Since 2004, the policymakers in China initiated a set of policies towards promoting agricultural and rural development to spur the rural economy and ease tensions in rural area. Credit policies, believed often to be efficient and guided tools to provide financing to investors, gained a great deal of appeal. Given the widely existing failure of government‐driven rural credit programs in many other developing countries, how the interventions affect the rural economy in China should be investigated. However, little has been done to explore the interventions on smallholder farmers and the existing evidence is therefore pieced and anecdotal. This paper aims to fill that gap.

Uses Bank of Italy’s Survey on Household Income and Wealth (SHIW) panel data for 1993 and 1995 to model transition probabilities at the bottom of the Italian wage distribution and to investigate the features and determinants of low‐wage mobility. The analysis is based on a bivariate probit model with endogenous switching which allows tackling the initial conditions problem, i.e. the potential endogeneity of the conditioning starting state. Results show the appropriateness of such a choice, the hypothesis of exogenous initial conditions being always rejected. Shows that while some factors such as education, sex and geographical location have an effect on low‐pay persistence, job‐related variables are more effective in avoiding falls into low pay from higher pay. It is also shown how raw persistence involves a considerable share of true state dependence, i.e. the experience of low pay raises, per se, the probability of future low‐pay episodes, irrespective of personal attributes.

The existence of adequate financial capital at start-up as well as during the lifetime of a firm is considered to be vital not only for its survival but also for its effective trading and growth, as it can act as a buffer against unforeseen difficulties (Cooper, Gimeno-Gascon, & Woo, 1994; Chandler & Hanks, 1998; Venkataraman & Van de Ven, 1998; Cassar, 2004). Inadequate or inappropriate capital structure is often the most common reason for a large proportion of small business failures (Chaganti, DeCarolis, & Deeds, 1995).

This chapter provides further evidence on the role of uncertainty and job complexity in pay-for-performance and autonomy decisions. It proposes an encompassing econometric approach in order to explain the differences in previous outcomes that may be due to differing methodological approaches. The main stylized fact is that autonomy and pay-for-performance are positively associated. Additionally, autonomy is positively related to job complexity and uncertainty suggesting that the relationship between these latter variables and pay-for-performance could be through autonomy. After controlling for autonomy, the positive relationship between pay-for-performance and job complexity disappears, while that between pay-for-performance and uncertainty becomes more negative.

In this chapter we consider the “Regularization of Derivative Expectation Operator” (Rodeo) of Lafferty and Wasserman (2008) and propose a modified Rodeo algorithm for semiparametric single index models (SIMs) in big data environment with many regressors. The method assumes sparsity that many of the regressors are irrelevant. It uses a greedy algorithm, in that, to estimate the semiparametric SIM of Ichimura (1993), all coefficients of the regressors are initially set to start from near zero, then we test iteratively if the derivative of the regression function estimator with respect to each coefficient is significantly different from zero. The basic idea of the modified Rodeo algorithm for SIM (to be called SIM-Rodeo) is to view the local bandwidth selection as a variable selection scheme which amplifies the coefficients for relevant variables while keeping the coefficients of irrelevant variables relatively small or at the initial starting values near zero. For sparse semiparametric SIM, the SIM-Rodeo algorithm is shown to attain consistency in variable selection. In addition, the algorithm is fast to finish the greedy steps. We compare SIM-Rodeo with SIM-Lasso method in Zeng et al. (2012). Our simulation results demonstrate that the proposed SIM-Rodeo method is consistent for variable selection and show that it has smaller integrated mean squared errors (IMSE) than SIM-Lasso.

This paper investigates the relationship between labour hoarding practices and training investments during severe economic downturns focusing on the case of Italy during the Great Recession.

Data come from the 2010 Italian wave of Continuing Vocational Training Survey (CVTS). Econometric estimates plug a proxy of labour hoarding into the probability function that firms provide either off-the-job or on-the-job training. A bivariate selectivity probit model is also used for robustness sake.

Results show that labour hoarding should not be considered as an enhancer of training investments when considered as a standing-alone practice in presence of severe and deep economic downturn. However, labour hoarding does not penalize off-the-job training investments if it occurs in an innovative firm or in a firm that perceive specific skill requirements in the workforce during the recessionary period.

The paper contributes to the debate on the role of labour hoarding during severe recessions by showing that it cannot be functional to re-oriented firms’ investments aimed at upskilling their workforce. It is only compatible with new training courses that accompany the workforce across a technological transition. Policy implications deals with the suitability of job retention schemes or state-financed furlough during recessions, as occurred during the coronavirus disease 2019 (COVID-19) pandemic.

In the 1990s, individuals aged 18–64 were eligible for disability insurance, if their work capacity was reduced by at least 25 percent (50 percent before 1993). In the beginning of the period, before 1991, disability insurance could also be granted for labor market reasons (i.e., if unemployed had been compensated long enough to exhaust their benefits – obtained benefits for 300 days). This possibility was gradually phased out after 1991. In 1995, the enforcement of the rules was tightened. When evaluating applications for disability pensions, local insurance offices now had to request a medical certificate and a work-related test of the applicant's degree of work capacity. Local offices also had to consult the applicant's employer, physician, or other qualified personnel, and even pay personal visits to the applicant. The possibilities for rehabilitating the applicant should also be investigated. From 1997, work incapacity should be evaluated in relation to all possible employment opportunities. Potential income changes resulting from changes in employment should not affect the evaluation⁴ (National Social Insurance Board, 2005).