WordPress list categories dropdown with parent-child relation and child under it’s parent

I am attempting to display a category dropdown (select) with parent categories and child categories tagged under the child category. Example:

Instead what I am getting is the following:

Here is my shortcode:

My question here is, which of the arguments are responsible for the correct ordering of the children under the parent taxonomy category? Is this at all done with arguments or is this a matter of the way I have to code the display of the options dropdown? I am really thankful for your time.