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Book part
Publication date: 6 August 2014

Kenneth Y. Chay and Dean R. Hyslop

We examine the roles of sample initial conditions and unobserved individual effects in consistent estimation of the dynamic binary response panel data model. Different…

Abstract

We examine the roles of sample initial conditions and unobserved individual effects in consistent estimation of the dynamic binary response panel data model. Different specifications of the model are estimated using female welfare and labor force participation data from the Survey of Income and Program Participation. These include alternative random effects (RE) models, in which the conditional distributions of both the unobserved heterogeneity and the initial conditions are specified, and fixed effects (FE) conditional logit models that make no assumptions on either distribution. There are several findings. First, the hypothesis that the sample initial conditions are exogenous is rejected by both samples. Misspecification of the initial conditions results in drastically overstated estimates of the state dependence and understated estimates of the short- and long-run effects of children on labor force participation. The FE conditional logit estimates are similar to the estimates from the RE model that is flexible with respect to both the initial conditions and the correlation between the unobserved heterogeneity and the covariates. For female labor force participation, there is evidence that fertility choices are correlated with both unobserved heterogeneity and pre-sample participation histories.

Book part
Publication date: 21 December 2010

Tong Zeng and R. Carter Hill

In this paper we use Monte Carlo sampling experiments to examine the properties of pretest estimators in the random parameters logit (RPL) model. The pretests are for the presence…

Abstract

In this paper we use Monte Carlo sampling experiments to examine the properties of pretest estimators in the random parameters logit (RPL) model. The pretests are for the presence of random parameters. We study the Lagrange multiplier (LM), likelihood ratio (LR), and Wald tests, using conditional logit as the restricted model. The LM test is the fastest test to implement among these three test procedures since it only uses restricted, conditional logit, estimates. However, the LM-based pretest estimator has poor risk properties. The ratio of LM-based pretest estimator root mean squared error (RMSE) to the random parameters logit model estimator RMSE diverges from one with increases in the standard deviation of the parameter distribution. The LR and Wald tests exhibit properties of consistent tests, with the power approaching one as the specification error increases, so that the pretest estimator is consistent. We explore the power of these three tests for the random parameters by calculating the empirical percentile values, size, and rejection rates of the test statistics. We find the power of LR and Wald tests decreases with increases in the mean of the coefficient distribution. The LM test has the weakest power for presence of the random coefficient in the RPL model.

Details

Maximum Simulated Likelihood Methods and Applications
Type: Book
ISBN: 978-0-85724-150-4

Article
Publication date: 31 January 2022

Youwei Yang, Wenjun Long and Calum G. Turvey

This paper investigates Chinese agricultural insurance agents willingness to offer (WTO) livestock insurance based on the variations of eight main attributes of livestock…

Abstract

Purpose

This paper investigates Chinese agricultural insurance agents willingness to offer (WTO) livestock insurance based on the variations of eight main attributes of livestock insurance.

Design/methodology/approach

This study implements discrete choice experiments (DCE) with actual insurance agents who design, sell and operate livestock insurance in China. The choice experiment of this study is based on the D-optimal approach, a six-block design, with 15 cards per block and two choices per card. The sample size was 211. Econometrics results are based on conditional and mixed logit models.

Findings

The authors find that the subsidy effect is enormous; a one level increase of subsidy leads to 3.166 times higher probability to offer. This subsidy effect is important as it confirms the endogenous structure between price and quantity in insurance offering, where subsidy does not only incentivize demand but also the supply. Another main factor of insurance investigated is the impact of different coverage types on agents' WTO. The authors find that agents prefer mortality insurance the most, followed by revenue insurance and profit insurance, while Index-Based Livestock Insurance (IBLI) is the least preferred to offer. Agents' knowledge about these newer types of insurance supports their WTO as well; thus, proper education is necessary to promote the more advanced types of livestock insurance.

Research limitations/implications

A limitation is that in the presence of COVID 19, and administrative issues at the local level, the sample was not randomly drawn. Nonetheless, the authors believe that there is enough diversity across participants, insurers and provinces and have done sufficient robustness checks to support results and conclusions.

Practical implications

This study provides further validation for the DCE research method that could potentially be applied to different analyses: using choice experiments to study insurers and reveal their preferences, through combinations of various levels of core attributes for insurance products. The findings and contribution are critical to the reform and improvement of livestock insurance in China and for insurance markets more broadly. The authors find that insurers do not place equal weights or values on insurance product attributes and do not view types of insurance equally. In other words, while farmers may hold different preferences about the type of insurance they demand, the results suggest that insurers also hold preferences in the type of insurance they sell.

Originality/value

So far as the authors are aware, this is the first DCE designed around the supply of insurance products with the subjects being insurance agents, marketers and executives.

Details

Agricultural Finance Review, vol. 82 no. 5
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 25 October 2013

Iris Stuart, Yong-Chul Shin, Donald P. Cram and Vijay Karan

The use of choice-based, matched, and other stratified sample designs is common in auditing research. However, it is not widely appreciated that the data analysis for these…

Abstract

The use of choice-based, matched, and other stratified sample designs is common in auditing research. However, it is not widely appreciated that the data analysis for these studies has to take into account the non-random nature of sample selection in these designs. A choice-based, matched or otherwise stratified sample is a nonrandom sample that must be analyzed using conditional analysis techniques. We review five research streams in the auditing area. These streams include work on determinants of audit litigation, audit fees, auditor reporting in financially distressed firms, audit quality and auditor switches. Cram, Karan, and Stuart (CKS) (2009) demonstrated the accuracy of conditional analysis, compared to unconditional analysis, of nonrandom samples through the use of simulations, replications, and mathematical proofs. Papers since published have continued to rely upon questionable research, however, and it is hard for researchers to identify what is the reliability of a given work. We complement and extend CKS (2009) by identifying audit papers in selected research streams whose results will likely differ if the data gathered are analyzed using conditional analysis techniques. Thus research can be advanced either by replication and reanalysis, or by refocus of new research upon issues that should no longer be viewed as settled.

Book part
Publication date: 1 August 2004

Harry P. Bowen and Margarethe F. Wiersema

Research on strategic choices available to the firm are often modeled as a limited number of possible decision outcomes and leads to a discrete limited dependent variable. A…

Abstract

Research on strategic choices available to the firm are often modeled as a limited number of possible decision outcomes and leads to a discrete limited dependent variable. A limited dependent variable can also arise when values of a continuous dependent variable are partially or wholly unobserved. This chapter discusses the methodological issues associated with such phenomena and the appropriate statistical methods developed to allow for consistent and efficient estimation of models that involve a limited dependent variable. The chapter also provides a road map for selecting the appropriate statistical technique and it offers guidelines for consistent interpretation and reporting of the statistical results.

Details

Research Methodology in Strategy and Management
Type: Book
ISBN: 978-1-84950-235-1

Article
Publication date: 29 October 2020

Rong Kong, Yanling Peng, Nan Meng, Hong Fu, Li Zhou, Yuehua Zhang and Calum Greig Turvey

In this study, the authors examined demand-side credit in rural China with the aims of understanding attribute preferences and the willingness of farmers to pay for credit.

Abstract

Purpose

In this study, the authors examined demand-side credit in rural China with the aims of understanding attribute preferences and the willingness of farmers to pay for credit.

Design/methodology/approach

The authors implemented an in-the-field discrete choice experiment (DCE) using a D-optimal block (6 × 9 × 3) design applied to 420 farm households across five Chinese provinces (Shandong, Sichuan, Shaanxi, Jiangsu and Henan) in the summer and fall of 2018. The DCE included six attributes including the interest rate, term of loan, type of loan, type of repayment, type of institution and mobile banking services.

Findings

Conditional and mixed logit results indicated a downward sloping credit demand curve with variable elasticity across regions. Provincial willingness-to-pay (WTP) indicators suggested that farmers were willing to pay a premium for long-term ( 0.03–0.687%) and low collateral credit loans ( 0.79–2.93%). Also, four of five provinces indicated a preference for loan amortization rather than lump-sum payment. Interestingly, in comparison to the Agricultural Bank of China (ABC), only farmers in Shandong, Sichuan and Shaanxi indicated a preference for rural credit cooperatives (RCCs)/banks and the Postal Savings Bank of China (PSBC). Another quite surprising result was bank services, in our case, access to mobile banking did not appear to induce WTP for agricultural credit. While conditional and mixed logit regression coefficients were similar (and therefore robust), the authors found that there was substantial heterogeneity across attribute preferences on term of loan, type of loan and amortization. Preferences for type of lender and mobile banking were generally homogenous. This result alone suggested that lenders should consider offering a suite of credit products with different attributes in order to maximize the potential pool of borrowers. While there were some differences across provinces, farmers appeared to be indifferent to lenders, and it did not appear that offering banking services such as mobile banking had any bearing on credit decisions.

Research limitations/implications

This paper presents a first step in using in-the-field choice experiments to better understand rural finance in China. Although the sample size satisfies conventional levels of significance and rank conditions, the authors caution against attributing results to China as a whole. Different provinces have different institutional structures and agricultural growing conditions and economies and these effects may differentially affect WTP for credit. Although by all indications farmers were aware of credit, not all farmers, in fact a minority, actually borrowed from a financial institution. This is not unusual in China, but for these farmers, the DCE was posed as hypothetical. Likewise, the study’s design was based on a generic credit product typical of rural China, and the authors caution against making inferences about other products with different attributes and risk structures.

Social implications

This study is motivated by the rapidly changing dynamic in China's agricultural economy. With specific reference to new laws and regulations about the transfer of land use rights (LURs), China's agricultural economy is undergoing significant and rapid change which will require better understanding by policy makers, lenders and practitioners of the changing credit needs of farmers, including the new and emerging class of commercial farmers.

Originality/value

To the best of the authors’ knowledge, the authors believe that the result provided in this paper present the first use of in-the-field DCE and are the first to be reported in either the English or Chinese literature on rural credit product design.

Details

China Agricultural Economic Review, vol. 13 no. 2
Type: Research Article
ISSN: 1756-137X

Keywords

Article
Publication date: 10 April 2017

Michael J. Turner and Leonard V. Coote

This paper aims to introduce and illustrate how discrete choice experiments (DCEs) can be used by accounting researchers and present an agenda of accounting-related research…

Abstract

Purpose

This paper aims to introduce and illustrate how discrete choice experiments (DCEs) can be used by accounting researchers and present an agenda of accounting-related research topics that might usefully benefit from the adoption of DCEs.

Design/methodology/approach

Each major phase involved in conducting a DCE is illustrated using a capital budgeting case study. The research agenda is based on a review of experimental research in financial accounting, management accounting and auditing.

Findings

DCEs can overcome some of the problems associated with asking decision-makers to rank or rate alternatives. Instead, they ask decision-makers to choose an alternative from a set. DCEs arguably better reflect the realities of real-world decision-making because decision-makers need to make trade-offs between all of the alternatives relevant to a decision. An important advantage that DCEs offer is their ability to calculate willingness-to-pay estimates, which can enable the valuation of non-market goods. Several streams of experimental accounting research would appear well-suited to investigation with DCEs.

Research limitations/implications

While every effort has been made to ensure that this illustration is as generic to as the many potential studies as possible, it may be that researchers seeking to utilise a DCE need to refer to additional literary sources. This study, however, should serve as a useful starting point.

Practical implications

Accounting researchers are expected to benefit from reading this article by being: made aware of the DCE method and its advantages; shown how to conduct a DCE; and provided with an agenda of accounting-related research topics that might usefully benefit from application of the DCE methodology.

Originality/value

It is the authors’ understanding that this is the first article directed to accounting academics regarding the conduct of DCEs for accounting research. It is hoped that this study can provide a useful platform for accounting academics to launch further research adopting DCEs.

Article
Publication date: 6 March 2017

Keldon Bauer and Omar A. Esqueda

Using the small-business loan market, this paper aims to test whether a structural shift in access to borrowers’ financial information (i.e. credit ratings) improves market…

1140

Abstract

Purpose

Using the small-business loan market, this paper aims to test whether a structural shift in access to borrowers’ financial information (i.e. credit ratings) improves market efficiency, thereby improving entrepreneurs’ access to external capital.

Design/methodology/approach

This research uses the National Survey of Small Business Finance in a conditional logistic regression framework to tease out the marginal propensity to grant lines of credit given the firm’s credit rating – treating both of the events, namely, line of credit and credit ratings, as endogenous variables. This methodology overcomes potential reverse causality issues.

Findings

The results show that information brokers have allowed small firms to break away from long-term monopolistic lending relationships, thus contributing to more informationally efficient markets. Small businesses benefit from better-informed lenders by having better access to capital. Also, women appear less likely to receive a line of credit even after adjusting for credit ratings.

Practical implications

This research highlights the importance of credit report awareness/monitoring by entrepreneurs, as the small-business credit rating grows rapidly. Relationship lending is not enough to reach optimal financing costs. These papers call for more regulated credit ratings industry to reduce potential moral hazards.

Originality/value

This paper tests whether bank lending relationships (soft information) still matter after accounting for credit ratings (hard information). Additionally, this study measures the extent to which information sharing by data services bureaus, a proxy for informational efficiency, has increased allocation efficiency in the small-business loan market.

Details

Studies in Economics and Finance, vol. 34 no. 1
Type: Research Article
ISSN: 1086-7376

Keywords

Article
Publication date: 23 February 2010

Peter Navarro, Philip Bromiley and Pedro Sottile

Business cycles strongly influence corporate sales and profits, yet strategy research largely ignores the possibility that corporate management practices related to the business…

2642

Abstract

Purpose

Business cycles strongly influence corporate sales and profits, yet strategy research largely ignores the possibility that corporate management practices related to the business cycle influence profitability. This paper aims to offer initial empirical support for the view that high peformance firms use a variety of business cycle management (BCM) practices that low performance firms do not.

Design/methodology/approach

This exploratory study examines the association of firm performance with business cycle management behaviors identified in the prescriptive literature and further developed from a set of case analyses. The empirical analysis uses a matched sample of 35 pairs of high vs low performers from the S&P 500.

Findings

Discriminant and conditional logit analyses provide preliminary evidence that business cycle‐sensitive behaviors such as countercyclical hiring and investment associate positively with firm performance.

Research limitations/implications

Future research should use larger data sets and strictly archival data to overcome the limitations of the small sample size and data coding with some subjective elements.

Practical implications

This research suggests a variety of business cycle related practices dealing with staffing, capital investment, acquisitions and divestitures, capital financing, credit policy, pricing, and advertising may improve firm performance.

Originality/value

This is the first paper to offer evidence of the impact of business cycle related practices across a range of practices and industries.

Details

Journal of Strategy and Management, vol. 3 no. 1
Type: Research Article
ISSN: 1755-425X

Keywords

Abstract

Details

Handbook of Microsimulation Modelling
Type: Book
ISBN: 978-1-78350-570-8

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