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This study aims to examine the determinants of the allowance for loan losses (ALL) and loan loss provisions (LLP) for banks in the Middle East and North African (MENA) region using both a two-stage approach and simultaneous equation system to address the potential problem of estimation bias introduced by estimating the ALL and LLP separately. The paper also tests three competing hypotheses: the earnings management hypothesis, the capital management hypothesis, and the signaling hypothesis.

The authors adopt a simultaneous equation and three-stage approaches to test whether MENA banks jointly determine LLP and ALL and the determinants of the two accounts. The sample consists of all available electronic data for 75 banks (451 bank-year observations) in nine MENA countries over the period 2000-2008.

Evidence suggests that the two accounts are jointly determined. The results support the earnings management hypothesis – meaning that MENA banks have engaged in year-to-year income smoothing. The authors also find that LLP and ALL provide signals about future earnings.

The authors acknowledge that the LLP account is only one of many accounts on the income statement that could be used for signaling or to manage earnings, and that the ALL is one of several accounts that could be used for signaling, earnings or capital management. Future studies could examine other accruals for their role in managing earnings, signaling and capital.

The results indicate that bank managers use LLP and ALL accounts to manage earnings management, policy makers may want to limit the ability of banks to manipulate earnings.

Prior research on the loan loss accounting practices has been based on single equation models of the determinants of LLP and ALL. An issue that has not been adequately addressed in this literature is that ALL and LLP may be interrelated and jointly determined by banks. If the two accounts are not independent of each other, failure to include one when estimating the other may lead to an omitted variable problem, while including both in the same equation induces a potential simultaneity bias. The study is the first empirical work examining whether ALL and LLP are jointly determined by banks. By jointly estimating LLP and ALL, the study permits an assessment of the magnitude of the potential error from adopting ordinary least squares estimation of a single equation model.

The purpose of this paper is to shed light on the effect of tax avoidance on corporate social responsibility performance. It also investigates whether audit quality affects tax avoidance practices by socially responsible performance.

Based on a sample of French non-financial companies over the period 2005 to 2016, this paper uses panel data regressions. The authors apply generalized least square panel regression to overcome autocorrelation and heteroscedasticity problems. For further robustness, this paper runs instrumental variable regressions using the three-stage instrument variable method (three-stage least square).

The results show that firms with high CSR scores are more likely to engage in aggressive tax avoidance. The findings also show that firms audited by high-quality auditors are more likely to get involved in CSR for hedging against the potential consequences of aggressive tax avoidance practices.

The findings are consistent with risk management theory, which suggests that firm’s hedge against any reputational risks that might arise from avoiding taxes by engaging more in CSR.

Results have implications for policymakers in that CSR firms audited by high-quality auditors may engage in CSR to overcome any negative reactions that could be caused as a result of tax avoidance. Thus, they need to be cautious about managers’ opportunistic behavior and enhance monitoring to enforce social compliance and to be tax compliant.

This paper extends the existing literature by examining the effect of audit quality on the relationship between CSR performance and corporate tax avoidance. Audit quality is deemed to be an important governance feature that is likely to constraint managerial opportunistic behaviors. Audit quality, along with CSR performance, are associated with a higher level of tax avoidance.

This study aims to investigate both market concentration and bank competition of banking across six emerging Asian countries (e.g., Bangladesh, Indonesia, India, Philippines, Malaysia, and Vietnam) over pre and post the 2008 global financial crisis. The conduct parameter approach following the framework suggested by Uchida and Tsutsui (2005) is used to estimate bank competition in these countries. The study employs both seemingly unrelated regression (SUR) and three-stage least squares (3SLS) to estimate simultaneously the system of equations in our model. Generally we find a negative association between market concentration and bank competition across most of the countries in the study suggesting that banks in concentrated markets collude to generate higher profits. Monopolistic competition was the best description of competitive structure of banking across the majority of countries investigated by this study. The study fills the gap in the banking literature by investigating bank competition, concentration, and their relationship across emerging Asian economies over the 2008 global financial crisis. Moreover, several policy implications for banking industry are suggested.

This paper aims to investigate two related questions on business research and development (R & D) simultaneously. First, does R & D create or resolve uncertainty? Second, does uncertainty encourage or discourage business R & D?

This paper uses the three-stage least squares regression method and a system of simultaneous equations to examine the two research questions simultaneously. Instrumental variables overcome the econometric endogeneity problem.

The results are consistent with the hypothesis that R & D creates rather than resolves uncertainty. Why then do risk-averse business managers undertake R & D? This paper argues that in creating uncertainty, R & D also creates “shadow options” for supplementary business investment not envisaged by business managers in the original objective for R & D. Rather, managers unexpectedly uncover shadow options in R & D’s inherent knowledge discovery process, which encourages business R & D in the first instance. Consistent with this real options interpretation, this paper reports evidence that volatility encourages R & D.

This paper differs from the current literature in the sense that it investigates the two related R & D questions simultaneously rather than individually. The authors argue that the two related questions are inextricably interrelated, and investigating the two questions simultaneously would provide results that can possibly solve conflicting empirical results in the current literature. The results are also particularly useful for business managers who make decisions on whether to undertake R & D projects or not.

This study uses a simultaneous equations approach to examine the price‐earnings relationship of non‐U.S. firms that directly list their securities in U.S. capital markets or trade as American Depository Receipts (ADRs). The Hausman test shows that price changes and earnings changes are endogenously determined, thus the simultaneous equations approach is used to estimate the earnings response coefficient (ERC) and the returns response coefficient (RRC). Under the ordinary least squares (OLS) estimation, the parameter estimates are biased downward because the OLS fails to correct for endogeneity. In general, our results show that the joint estimation procedure mitigates some of the single‐equation bias. The estimated ERC and the RRC are higher under the three stage least regression (3SLS) than under the OLS regression. In addition, the product of the ERC and the RRC coefficients approaches its theoretical value of one when using the 3SLS estimation. The evidence also shows that institutional factors affect the way the market value information for these firms. We find that the ERC and RRC are insignificant for the common law non‐ADR firms and significantly positive for common law ADR firms.

In the last two decades there has been considerable progress made in the development of alternative estimation techniques to ordinary least squares (OLS) regression. The search for alternative estimators has no doubt been motivated by the observance of erratic OLS estimator behavior in cases where there are too few observations, multicollinearity problems, or simply “information‐poor” data sets. Imprecise and unreliable OLS coefficient estimates have been the result.

The objectives of this paper are to analyze the drivers of smoked marine fish prices and examine the challenges along the value chain to inform policy.

The study relies on cross-sectional data from 158 fish smokers, 100 wholesalers, and 120 retailers in Ghana. The challenges faced by the actors along the chain are identified and ranked using Kendall's coefficient of concordance. The three-stage least square estimation approach is employed to control for endogeneity resulting from the simultaneous equations for prices of different fish types and their substitutes.

The results reveal that marketing experience, the extent of competition, price of substitutes, payment terms, and variable cost items, such as transportation cost and storage charges, are key determinants of smoked fish prices along the value chain. Lack of access to credit is the main constraint to the marketing of smoked marine fish, irrespective of the actor or the fish type.

Many studies have established the linkages between fish consumption, prices, and food security in the literature. However, there is a dearth of information on the responsiveness of fish prices to changes in the market and seller-specific factors to drive policy to stabilize prices along the value chain.

The peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-09-2021-0566

This study investigates the interrelationships between efficiency, competition and risk in the Chinese banking industry.

Parametric stochastic frontier analysis is used to estimate bank efficiency; the Lerner index is used as the competition indicator; accounting ratios and a translog function are used to measure different types of risk and finally, the three-stage least square estimator is used to investigate the interrelationships.

The results of this study show that the impact of competition on different types of risk is significant and positive, while there is a significant and positive impact of credit risk, liquidity risk and capital risk on bank competition. In addition, the findings demonstrate that the interrelationships between efficiency and competition are significant and negative. The authors do not find any robust interrelationships between different types of risk and different types of efficiency; the authors find that diversification and higher levels of profitability reduce bank credit risk. The results suggest that a higher developed banking sector reduces the level of bank competition in China.

This is the first piece of research that comprehensively investigates the interrelationships between different types of risk, competition and different efficiencies in China.

This study investigates the interrelationships between competitions in different banking markets and shadow banking for the Chinese banking industry over the period 2003–2017. The current study also examines the determinants of competition in different banking markets and the factors influencing the size of shadow banking.

Bank competition is measured by the Boone indicator, while the relationship between bank competition and shadow banking is examined through a three-stage least square estimator.

The findings suggest that a larger volume of shadow banking leads to a decline in the level of competition in the deposit market, loan market and noninterest income market, while an increase in the level of competition in the loan market, deposit market and noninterest income market leads to an expansion of shadow banking. The authors find that higher bank risk and higher developed of stock market reduce the competitive condition in the loan market, and the competition in the deposit market will be enhanced by higher levels of banking sector development and higher levels of inflation, but bank diversification will reduce the level of competition in the deposit market. The authors further find that higher bank profitability and higher stock market development reduce bank competition in the noninterest income market. Finally, the results show that larger bank size and higher development of stock market reduce the size of shadow banking in China, but higher economic growth increases the size of shadow banking.

This is the first piece of research investigating the relationship between bank competition and shadow banking. This will also be the first piece of research examining the determinants of competition in different banking markets and also the factors influencing the size of shadowing banking in China.

This paper aims to understand the motivations behind married men preferring sons and to quantify the association between a couple’s stated son preferences. Son preference is an endemic problem in India. With half a million female foetuses aborted each year, the root causes of son preference in India have been widely studied. Little is known, however, on how couples mutually decide on their desired child sex-ratio.

Using data from the third National Family and Health Survey, the authors apply three-stage least square and optimal general method of moment methods to demonstrate association. Robustness checks are performed on plausibly exogenous instrumental variables and selection issues in the marriage market.

The authors show that their spouse's son preference is by far the most significant factor associated with a person's own stated son preference. The association between spouse's stated son preference is observed only for couples being married for three to five years. It is postulated that this is the critical period when sex-selective abortion decisions are being made.

The focus of existing empirical studies is nearly always on the mother's son preference only. The hypothesis is that spouses mutually influence each other’s preferences and models estimating determinants of son preference should include preferences of both spouses. To the best of the authors’ knowledge, this is the first attempt to understand the motivations of married men towards preferring sons and quantify the association between spouse's stated son preference and respondent's stated son preference.