A Study of Banks’ Systemic Importance and Moral Hazard Behaviour: A Panel Threshold Regression Approach
Round 1
Reviewer 1 Report
Title: A Study of Banks’ Systemic Importance and Moral Hazard Behaviour: A Panel Threshold Regression Approach
In the introduction, the authors need to clearly state the research gap as well as the new contribution of this study to the literature. In this section, the authors must update recent studies related to moral hazard. I see that the latest research that this article covers is up to 2020. I therefore recommend the authors cite some of the following studies: Nguyen and Dang (2022); Qayyum et al. (2021); Nguyen (2022); Srinidhi (2021)
Qayyum, A., Rehman, I. U., Shahzad, F., Khan, N., Nawaz, F., Kokkalis, P., & Sergi, B. S. (2021). Board gender diversity and stock price crash risk: going beyond tokenism. Borsa Istanbul Review, 21(3), 269-280.
Nguyen, Q. K. (2022). Audit committee structure, institutional quality, and bank stability: evidence from ASEAN countries. Finance Research Letters, 46, 102369.
Nguyen, Q. K., & Dang, V. C. (2022). Does the country’s institutional quality enhance the role of risk governance in preventing bank risk? Applied Economics Letters, 1-4.
Srinidhi, B. (2021). Board Governance and Information Quality Information for Efficient Decision Making: Big Data, Blockchain and Relevance (pp. 493-524): World Scientific.
In the hypotheses development, hypothesis development must be based on theory and empirical evidence from previous studies. The author's hypotheses are based only on the author's own judgment. Therefore, this section must be rewritten in a more scientific way and need to supplement the basis for the arguments.
In section 5, the authors need to clearly present the data collection process, explaining why the period 2012-2020 was chosen. How many firms are on the data, how to handle outliers, and is the data balanced...
The measurement of variables needs a specific basis. Authors need to explain as well as cite previous studies to show that it is reasonable to measure such variables.
In conclusion, the authors need to point out the limitations of the study and give directions for further research.
Author Response
I sincerely appreciate the time and energy spent by you in reviewing our paper. Please find the point-by-point response to the issues raised.
- Changes in the Introduction section- Please see the attachment (highlighted sections in yellow colour).
- Changes in the Hypothesis Development- Please see the attachment (highlighted sections in yellow colour).
- Data- I have added the main source for the selection and measurement of variables chosen to calculate systemic importance scores. For the Moral hazard part, variables have been measured by the authors together with an appropriate formula.
Author Response File: 
Author Response.pdf
Reviewer 2 Report
The presented paper is very clearly written, well readable, beginning by the clear determination of the research task importance, with consequent determination of the gap in the literature, plus comparison with various authors from the view of present state of problem solving.
The main research is made by two hypothesis testing, and the results points to the rejection of acceptance of the hypothesis.
In spite of the mentioned positives of the contribution, I recommend the authors make small corrections, such as:
page 3 - first paragraph - please use the same formatting
page 3 - I do not recommend to use title of the chapter as question, since the paper is going to be published in the scientific journal, not in the newspaper
page 4 - please, use the same word - portion, part, section - unification is requested.
small english language mistakes, for example, page 2 - I recommend to use the word calculation, not computation.
I recommend authors use the general chapters structure, such as Introduction, Literature review, Methodology and data, Results, Discussions, Conclusions.
Models should be considered as variants? Its not clear.
please, correct Figure 1 - its not clear, where the arrows are leading.
some shortages in the text are not clear for all readers
please, name the tables in the text by unified form - for example - page 8 - once Table 1.3, once table 1.3.
I recommend for some calculations using of calculation editor, for example at page 8, last paragraph
page 9 - what is : its cotemporaneus values - something is missing
I recommend to use numbering of the equations
Why in the page 10 there is H0 and Ha, when in previous text there is H0 and H1?
page 10- 3rd paragraph "As a result, the least squeares estimator is - following equation is not clear.
Table 2.1 - page 17 - please, correct if it is 0,1 and 2 lagged periods - it means 0.1 or 0, 1 and 2 - if it is 0 and 1 and 2, please use the gap, if it is decimal number, please, use 0.1
References are not formatted according to the journal, mainly Journal titles of the references should be in italic.
Author Response
I sincerely appreciate the time and energy spent by you in reviewing our paper with such depth. We are thankful to for your positive response to our paper. We have made the required changes in the document. Please find the file attached within which we have highlighted the changed part.
Author Response File: Author Response.pdf
Reviewer 3 Report
I have read the paper with great interest. I think that the paper is built on solid foundations: interesting question and good empirical anaysis.
My main comment is that the paper does not make clear its contribution. It is difficult to understand its originality. The paper is currently written as a moral hazard paper, similar to
Thomas, R., & Singh Thakur, S. (2020). Non-performing Loans and Moral Hazard in the Indian Banking Sector: A Threshold Panel Regression Approach. Global Business Review, 0(0). https://doi.org/10.1177/0972150920926135
This is because the paper claims to have two goals: a) to investigate moral hazard in the Indian banking industry and b) to examine systemic importance. The problem is that a) is done by Thomas et al. (2020), using almost the same data.
I would suggest that large parts of the introduction are re-written so as to focus on the added contribution, which is that of systemic importance. I would also suggest that some vanilla results without systemic analysis are removed. It is fine if the paper becomes shorter.
Some further minor comments:
a) The abstract could be shorter and sharper. The sentences “Non-performing loans may be either…recovery” are not needed.
b) Page 3, first paragraph: there is an issue with the section formatting.
c) Pages 10-11, model: please fix the subscript notations as they are not subscripts everywhere, i.e. beta_1.
d) Claire (1992) on page 13 should be Clair.
e) In the robustness or in the conclusion section I would discuss the fact that the relationship could have changed (structural break) in intensity due to COVID-19 or other economy wide events, see e.g. Karavias et al. (2022). However, this should not be a big issue, at least for COVID-19, as its impact would be restricted to only the last year in the sample.
f) Page 13: I think there is a section formatting issue again where letters are bold.
g) While the paper of Thomas at al. (2020) appears in the refrences, it does not appear in the text.
References:
Yiannis Karavias, Paresh Kumar Narayan & Joakim Westerlund (2022) Structural Breaks in Interactive Effects Panels and the Stock Market Reaction to COVID-19, Journal of Business & Economic Statistics, DOI: 10.1080/07350015.2022.2053690
Author Response
I sincerely appreciate the time and energy spent by you in reviewing our paper with such depth. We are thankful for your positive response to our paper. Please find the explanation for the reviews provided by you highlighted in grey colour.
- As you rightly pointed out, the methodology has been referred from the paper mentioned by you. However, denoting the relevance and contribution of this research paper, the Introduction section has been divided into 3 categories. First 2 explain the systemic importance and moral hazard and the third explains the relationship between the two. We have now separately mentioned the research gaps in the literature and how our study is an improvement over the same. We have made the required changes in the document regarding the contribution of our paper to the literature. Please find the file attached within which we have highlighted the changed part.
- We did consider removing the vanilla results without systemic analysis, however then we decided not to do the same. In the Thomas & Thakur (2020), the data period is 2009-2015 with 45 banks in total, whereas our paper is based on 38 banks in total ranging from 2012 to 2020 as in 2103 RBI announced SBI as the first Too Big to Fail (TBTF). Also, in this period bank mergers took place due to which our sample size became even shorter. Thus, we presented the findings even without systemic analysis. As expected, the results differ from the ones obtained Thomas & Thakur (2020).
- All the other changes have been in the manuscript. Please find the file attached with changes highlighted in blue colour.
Author Response File: Author Response.pdf
Round 2
Reviewer 1 Report
In the revision, I see the authors make some improvements but my comments seem to have been incomplete and without a satisfactory explanation.
- In the introduction, the authors have not updated the relevant studies, and the studies cited in the article are very old, I only saw a few studies in 2020. Therefore, the study lacks updates. . I recommend authors review and cite studies as follows: Nguyen and Dang (2022); Srinidhi (2021); Nguyen (2020); Qayyum et al. (2021)
· Nguyen, Q. K. (2020). Ownership structure and bank risk-taking in ASEAN countries: A quantile regression approach. Cogent Economics & Finance, 8(1), 1809789.
· Nguyen, Q. K., & Dang, V. C. (2022). Does the country’s institutional quality enhance the role of risk governance in preventing bank risk? Applied Economics Letters, 1-4.
· Qayyum, A., Rehman, I. U., Shahzad, F., Khan, N., Nawaz, F., Kokkalis, P., & Sergi, B. S. (2021). Board gender diversity and stock price crash risk: going beyond tokenism. Borsa Istanbul Review, 21(3), 269-280.
· Srinidhi, B. (2021). Board Governance and Information Quality Information for Efficient Decision Making: Big Data, Blockchain and Relevance (pp. 493-524): World Scientific.
- Any citation in the main text must be shown in the references, I see some additional citations but not in references, the authors need to review and fully supplement in the references section.
- I only see section 1.2 without section 1.1
- In section 4, the authors edited too lightly. I have only seen authors add just 1 citation to H1, while not editing the H2 hypothesis development. Authors must clearly argue, based on which theories, on which previous studies. Authors can refer to the previous studies I suggested above.
- In conclusion, the authors almost did not edit according to my suggestions and did not have an explanation. The authors need to point out the limitations of the study and give directions for further research.
Author Response
First, I apologise for making these mistakes in this study and thank you for devoting your precious time to thoroughly reviewing this study. Please find the attached document with all the changes in yellow and explanations below.
- I have added Nguyen (2020) in section 1.1 and Nguyen and Dang (2022) in section 3.
- corrections in citations and references have been made.
- section 1.1 has been added
- I have added Zhang, Dickinson & Kutan (2016) in H1 and a few more studies in H2 for theoretical support together with Thomas & Thakur, 2020 and Zhang, Dickinson, and Kutan, 2016 for methodology.
- The conclusion has been improved.
Author Response File: Author Response.pdf
Reviewer 3 Report
Thank you for addressing my comments.
Author Response
Thank you for reviewing this study
Round 3
Reviewer 1 Report
This version is satisfied.
