Revenue Identification in Attaining Consensus Estimates on Income Predictions: The Function of Ownership Concentration and Managerial Ownership Confirmation from Poland

Round 1

Reviewer 1 Report

The paper deals with interesting research questions on the scope of earnings management, or “window dressing”, in financial statements, with a clear focus on one item: revenues. The authors provided a study on how ownership structure (institutional investors, ownership concertation, and managerial ownership) influence revenue management in the case of a slight difference between analysts’ consensus on revenues and actual results. As such, the research scope is narrow enough to fill in the gap in the literature, even if the data represents just one country.

However, the paper requires several improvements:

1/ The design of the research requires more justifications:

• the reasons for separating negative and positive surprises (which is particularly interesting because of the results; see later),
• the reasons for the thresholds assumed by the author when constructing dummy variables (e.g. 3% for management ownership, 40% for CONC variable, 35% for INST variable); or at least the information if any sensitivity analysis (robustness test) was performed and how these thresholds influence the results.
• the reasons behind the PAN-F variable and the description of its method. This measure may be difficult to apply if the results of the research were to checked on other markets.

2/ the results should be supplemented by the author interpretation of the positive sign of PISIBEAT_OPIC coefficient. This result is significant and contrary to the author’s prediction. Maybe the result is spurious, but author presents the other results of the very same model as the original input of the paper. According to the study, if actual revenues slightly beats the analysts’ consensus, the managers employs discretionary revenues to make them larger. The proper and lengthy discussion of this surprising result is necessary.

The paper requires a deep language revision, e.g.

1. 58: “The research was conducted founded on…”
2. 89: “In line with  the  alignment  of  interest  hypothesis…”

Despite these shortcomings, the paper presents interesting results. My main concerns are about the scope of the journal: why the author decided to publish this research in Sustainability? I see no trace of an attempt to link the research to the problems of sustainability.

Author Response

Dear Reviewer,    

I would like to thank the Reviewer for her/his valuable comments and recommendations, thanks to which it was possible to enrich and increase the quality of this article. I tried to take into account all the comments of the Reviewer in detail.

 

1/ The design of the research requires more justifications:

• the reasons for separating negative and positive surprises (which is particularly interesting because of the results; see later),

I have explained in the text the reasons for separating negative and positive income surprises:

In accordance with Caylor's research approach [7], not only negative income surprises were introduced into the research project, but also positive ones. This is dictated by the intention to show not only the discontinuation of discretionary revenues, but moreover, a negative estimate of the parameter is expected if the income prior to intentional shaping is slightly greater than the income prediction. This would indicate a reduction in discretionary revenues under these conditions. Lines 302-307.

 

• the reasons for the thresholds assumed by the author when constructing dummy variables (e.g. 3% for management ownership, 40% for CONC variable, 35% for INST variable); or at least the information if any sensitivity analysis (robustness test) was performed and how these thresholds influence the results.

 

In the article I extended the description of creating thresholds for CONC, INST, MNG variables:

The thresholds adopted for the values of 0 or 1 for the CONC, INST, and MNG variables resulted from the characteristics of the distribution of individual variables in the sample. And so for CONC variable, the limit was adopted at the percentile level k = 0.6. For the INST variable, the limit at the percentile level k - 0.65 was adopted. These assumptions guarantee a relatively high degree of ownership concentration. For the MNG variable, the limit was set at the percentile level k = 0.7. Lines: 308-313.

 

• the reasons behind the PAN-F variable and the description of its method. This measure may be difficult to apply if the results of the research were to checked on other markets.

I have explained the PAN-F model in the paper. 

PAN-F model is often used in Polish setting for bankruptcy prediction. The formula of the model is as follows: F = -2.478 + 9.478 (operating income / assets) + 3.613 (equity/assets) + 3.246 ((net earnings + depreciation) / liabilities)) + 0.455 current ratio + 0.802 (revenue / assets).  Lines: 314-317.

As the sources are only in Polish, I gave up giving the references (sources).

The source is: Mączyńska, E. and Zawadzki, M. 2006, Dyskryminacyjne Modele Predykcji Bankructwa Przedsiębiorstw, Ekonomista, (2): 205-235. The access is through the website of Polish Central Bank:  https://www.nbp.pl/publikacje/materialy_i_studia/ms286.pdf

I agree with the Reviewer that the use of this model is limited for studies based on data from other countries. However, as far as I can see, such models have been developed in various countries, adapted to national conditions. Of course, this will be a problem if such research is carried out internationally.

 

2/ the results should be supplemented by the author interpretation of the positive sign of PISIBEAT_OPIC coefficient. This result is significant and contrary to the author’s prediction. Maybe the result is spurious, but author presents the other results of the very same model as the original input of the paper. According to the study, if actual revenues slightly beats the analysts’ consensus, the managers employs discretionary revenues to make them larger. The proper and lengthy discussion of this surprising result is necessary.

I addressed the issue of positive income surprises in two places in the body of the article, as recommended by the Reviewer:

In accordance with Caylor's research approach [7], not only negative income surprises were introduced into the research project, but also positive ones. This is dictated by the intention to show not only the discontinuation of discretionary revenues, but moreover, a negative estimate of the parameter is expected if the income prior to intentional shaping is slightly greater than the income prediction. This would indicate a reduction in discretionary revenues under these conditions. Lines: 302-307.

 

This research result is inconsistent with the expectations listed in Section 2 and demonstrates that even when the operating income before intentional shaping equals or slightly exceeds the amount of the prediction, discretionary revenues are increased. This may indicate the tendency of reporting entities not only to avoid unfavourable deviations from the operating income forecast, but also the motivation to exceed the reported operating result above the prediction. It may also indicate the specific characteristics of the predicted operating income as a benchmark. On the other hand, it should be taken into account that in the other models (R_, OPINC) such a regularity has not occurred, and therefore it is possible that the result may be spurious. Lines: 439-448.

 

The paper requires a deep language revision, e.g.

1. 58: “The research was conducted founded on…”
2. 89: “In line with  the  alignment  of  interest  hypothesis…”

The sentences have been corrected. Lines: 61, the second item was deleted.

 

Despite these shortcomings, the paper presents interesting results. My main concerns are about the scope of the journal: why the author decided to publish this research in Sustainability? I see no trace of an attempt to link the research to the problems of sustainability.

 

In the Conclusions section, I have explained the relationship of my study with sustainability:

The paper also refers to issues of sustainable development. Financial pellucidity, containing clearness of transactions, is one of the mainstays of sustainability [75, 76]. The research sphere analysing the relationships between the ownership structure, monitoring activities through the accounting information and sustainability is an important part of contemporary finance and accounting [77, 78, 79, 80]. Earnings management influences monitoring activities of the enterprises, therefore it has a direct relationship with sustainability and economic performance [81, 82]. This study examines the motivators that influence the magnitudes of discretionary revenue, which is relevant to the security of economic transactions. Lines: 595-603

 

 

Andrzej Piosik

Reviewer 2 Report

Dear authors,

 

Your paper is ok. Bellow you’ll find some advice to improve it.

The introduction section presents a few issues. Starting in line 72, you make a detailed description of the papers’ sections. I advise you to shorten this description.

Furthermore, the last paragraph of the introduction section, departing from line 85 is more suitable for the discussion or conclusion. I don’t believe that the introduction section is the right place to describe what are the papers achievements. I further advice you to improve why is important to study this research topic and what is intended to fulfil with it, instead of the mentioned description.

 

Overall, the remaining parts of you paper are ok. Yet, the full period, here: “0.079 .” at table 5, third line of the column “P” is not clear what it means. The same issue happens in several lines of the column “P”. I imagine that it’s a call for the description in the bottom of the table. If it is, you must change it. I further recommend changing the “T” and the “P” to “t” and “p” values as mentioned in the table description in the bottom.

 

Furthermore, a critical part of the results is missing in the results section. You should mention what are the results of the tested hypotheses. You have mention them in the conclusion section, yet the right place to put them is in section 4.

 

I further recommend expanding the discussion and/or conclusion sections. Overall, the results are not sufficient explored, as a matter of fact, I think that the conclusion is too short and the contributions to theory and practice are insufficient.

Furthermore, the conclusion is not the right place for table 7. I advise you to put it in the results section.

 

Good luck with your work

Author Response

Dear Reviewer

I would like to thank the Reviewer for her / his valuable comments and recommendations that allowed me to enrich and improve the article. I tried to take into account all the comments of the Reviewer in detail.

 

 

1. The introduction section presents a few issues. Starting in line 72, you make a detailed description of the papers’ sections. I advise you to shorten this description.

Following the Reviewer's recommendations, I have shortened the description of individual sections in the Introduction. Currently, the content in this regard is as follows:

The paper includes an Introduction (Section 1), Prior Research and Hypothesis Development (Section 2), Data and Methodology (Section 3), Results (Section 4), Discussion (Section 5) and Conclusions (Section 6). In Section 2, I describe the previous findings of major investigations on the significance of income benchmarks in intentional formation of earnings with the special role of ownership structure elements, and I have developed some hypotheses. Section 3 describes the research approach and variables used in the model. In section 4 I present an estimation of the model parameters. In Section 5, I discuss the research results and how they relate to those of other authors. Section 6 describes the research results and how they relate to the hypotheses.

Lines: 76-90

 

2. Furthermore, the last paragraph of the introduction section, departing from line 85 is more suitable for the discussion or conclusion. I don’t believe that the introduction section is the right place to describe what are the papers achievements. I further advice you to improve why is important to study this research topic and what is intended to fulfil with it, instead of the mentioned description.

 In line with the Reviewer's recommendation, the description of the research conclusions was removed. Instead, a description of the "added value" of the article is provided. The content of this description is as follows:

The novelty and originality of this article lies in the fact that the functions of the elements of the ownership structure of enterprises are considered in the context of the avoidance of unfavourable deviations of the reported income from the consensus of analysts' income predictions. First of all, the study emphasized the function of a specific earnings management instrument, which is shaping discretionary revenue. According to the author, it is worth researching the relationships between the elements of the company's ownership structure (such as high ownership concentration and managerial ownership) and selected earnings management instruments. Such studies complement the investigations using mainly synthetic earnings management indicators [9, 11, 18, 19, 21, 22, 23, 25, 30]. Lines: 102-110.

 

The description of the research findings in the Introduction was kept to a minimum.

The paper shows that enterprises substantially enhance discretionary revenue if their revenue and operating income prior to intentional shaping are marginally below analyst consensus. The elements of the ownership structure have limited influence in shaping discretionary revenue to meet the income benchmarks. Lines: 111-115.

 

3. Overall, the remaining parts of you paper are ok. Yet, the full period, here: “0.079 .” at table 5, third line of the column “P” is not clear what it means. The same issue happens in several lines of the column “P”. I imagine that it’s a call for the description in the bottom of the table. If it is, you must change it. I further recommend changing the “T” and the “P” to “t” and “p” values as mentioned in the table description in the bottom.

 “0.079 .” and similar items– as explained in the tables (4, 5, 6) in Signif. codes means that p =  0.1.

As it may not have been very clear, I added an explanation to tables 4, 5, 6:

(‘.’ - the result was on the statistical trend)

The symbols T and P were confused and changed to lowercase.

 

4. Furthermore, a critical part of the results is missing in the results section. You should mention what are the results of the tested hypotheses. You have mention them in the conclusion section, yet the right place to put them is in section 4.

The summary of hypothesis confirmation (Table 7) has been moved to subchapter 4.2. Lines: 477-478.

I have also added additional description of the results in Section 4:

The results show that the higher degree of ownership concentration does not influence the avoidance of unfavourable deviations of the reported income (revenue, operating income, net earnings) from the income prediction. (Below table 4, Lines: 417-420)

This research result is inconsistent with the expectations listed in Section 2 and demonstrates that even when the operating result before intentional shaping equals or slightly exceeds the amount of the prediction, discretionary revenues are increased. This may indicate the tendency of reporting entities not only to avoid unfavourable deviations from the operating income forecast, but also the motivation to exceed the reported operating result above the prediction. (Below table 5, lines: 439-448)

 

5. I further recommend expanding the discussion and/or conclusion sections. Overall, the results are not sufficient explored, as a matter of fact, I think that the conclusion is too short and the contributions to theory and practice are insufficient.

Furthermore, the conclusion is not the right place for table 7. I advise you to put it in the results section.

The summary of hypothesis confirmation (Table 7) has been moved to subchapter 4.2.

The study largely confirms the earnings management hypothesis [1, 2, 3, 4, 5, 6] but it expands the range of income measures, supplementing them with revenue and operating income. – lines: 482-484.

The results of Caylor's research were referred to:

The results were different from Caylor, where net earnings proved to be a significant benchmark in the use of discretionary revenue [7]. Lines: 494-496.

Limited research on benchmarks other than net earnings was addressed:

This issue has so far been poorly addressed in the literature on the subject. Therefore, the following conclusions can be drawn from the investigation: predicted sales revenues and operating profit are important indicators of corporate performance and constitute an important benchmark in shaping discretionary revenues.  Lines: 501-505.

References to research on the functions of managerial ownership in earnings management have been extended:

This may be in line with the scepticism hypothesis concerning the function of managerial ownership [61] and is incompatible with the alignment of interests hypothesis [15, 16, 17, 18, 30, 19, 20, 33]. The research results do not confirm, however the entrenchment hypothesis [55, 21, 22, 23, 24, 25] in terms of discretionary revenue as an earnings management instrument, if we take into account operating profit and net earnings benchmarks. The study does not analyse the curvilinear relationships in this respect, but there were no such grounds either, taking into account the results of previous investigations on earnings management in Poland [33, 49]. Therefore, we conclude that the function of managerial ownership in earnings management by means of discretionary revenue is important, but only in terms of achieving the revenue benchmark. However, it is not significant for operating income and net earnings benchmarks. Lines: 516-527.

References to other authors' research on the property concentration function have been supplemented:

In this case, the results are inconsistent with both the efficient monitoring hypothesis [12, 30] and the expropriation hypotheses [8, 9, 10, 11]. Therefore, they correspond more closely to the hypothesis claiming a correlation between earnings management and ownership concentration [52, 17, 53] and claiming the role of institutional investors [64, 65]. However, it is worth taking into account the fact that the study analysed the factor of the presence of a significant share of institutional investors in ownership, and not the presence of any proportion. Lines: 531-537.

I have also completed the Conclusion Section: lines:  558-560; 566-569; 572-575; 585-588; 595-603.

 

 

Andrzej Piosik

Reviewer 3 Report

Here are my comments on the paper, Revenue identification in attaining consensus estimates on income predictions: the function of ownership concentration and managerial ownership. Confirmation from Poland.  

1. The author kept using "we" throughout the paper. Who is "we" given that there is a single author on the paper.
2. Why was Poland the focus of this study?  Are there any special reasons for using Poland in this paper?
3. On line 118, after Poland, there should be a comma.
4. On line 123, there should be a comma before and after therefore.
5. On line 126, take out "in order" because it is wordy. 
6. On line 176, rewrite it from "make the following hypothesis" to "the following hypothesis is proposed." 
7. On line 233, rewrite "The model is as follows:" to "The model becomes"
8. On line 285 the word "form" should be "from."
9. On line 308 the title should be Descriptive Statistics and in line 312, change data to statistics. 
10. Line 325-327, please clearly identify what is KS.  I suspect that KS is the Kolmogorov–Smirnov test?
11. Line 331-332, Why?  Was this done in other empirical studies?  Also if the N is small and there is a large T panel dataset, the serial correlation becomes a major issue.  If the serial correlation is not a major issue, one could just use the robust (cluster) standard errors.
12. In the title of Table 3 what is "Reconnoitring?"
13. It is not clear what is going on in Table 3.  There are four tests being used.  The Hausman Test examines "the random effects estimate is insignificantly different from the unbiased fixed effect estimate (Kennedy, 2008: 286)." In other words, if the null hypothesis is rejected, then the empirical analysis needs to use the fixed effects. 
14. In tables 4, 5, and 6, there is a column called s.e. which is the standard errors.  Are the standard errors robust (clustered) standard errors? 
15.  In tables 5 and 6, the column designated as B should be B coefficient to be consistent with table 4. 
16. What does the Arellano method show?  It is not clear from the present discussion. This reviewer is familiar with the Arellano-Bond estimator as used in the dynamic panel regression models.  Is this the use of the Arellano-Bond estimator?  From the discussion, it is not clear what the Arellano method is.
17. Under section 6, Conclusion, the discussion is not bad.  But the author should tie these results back to the literature.  How did the results of this paper compare to the results in earlier works in the literature? An elaboration back to the literature would be helpful and would strengthen this section. 
18. Line 483-484 rewrite the following from "In table 7, we introduce details on the...." to "Table 7 summarized the..."
19. In line 494, there should be a comma before and after "in practice."
20. In line 497, there should be a comma after investors. 
21. The Data Availability Statement needs to be revised to replace the boilerplate language.
22. The author needs to discuss in the paper how does the content of this paper fit into the scope of sustainability?
23. The references do not conform to the style guidelines as required by Sustainability, so the author needs to carefully revise the references. 

Author Response

Dear Reviewer

Thank you for your comments on my article, which will certainly improve its quality.

I tried to take into account all the comments of the Reviewer in detail:

 

1. The author kept using "we" throughout the paper. Who is "we" given that there is a single author on the paper.

In line with the Reviewer's remark, I changed ‘WE’ to ‘I’.

1. Why was Poland the focus of this study?  Are there any special reasons for using Poland in this paper?

I tried to explain this in Introduction lines 60-64:

The research was conducted founded on companies registered in the Warsaw Stock Exchange (WSE) in Poland, for which quarterly consensus forecasts of income (revenue, operating income and net earnings) in 2016-2020 are prepared. There were several reasons for choosing such a sample of companies. First, the stock prices of the companies listed on the WSE respond positively to meeting the net earnings benchmarks [32]. The second reason is that these companies are relatively diverse in terms of magnitudes of ownership concentration, managerial holding and institutional investors in equity [33].  

Lines 61-68

I have also added in the relevant paragraph :

The high variability of the elements of the ownership structure raises a significant question as to its function in earning management, including revenue recognition.

Lines 68-70.

1. On line 118, after Poland, there should be a comma.

Corrected, line 138

1. On line 123, there should be a comma before and after therefore.

Corrected, line 143

1. On line 126, take out "in order" because it is wordy. 

Corrected, line 146

1. On line 176, rewrite it from "make the following hypothesis" to "the following hypothesis is proposed." 

Corrected, line 197

1. On line 233, rewrite "The model is as follows:" to "The model becomes"

Corrected, line 254

1. On line 285 the word "form" should be "from."

Corrected, line 324

1. On line 308 the title should be Descriptive Statistics and in line 312, change data to statistics. 

Corrected, line 348.

1. Line 325-327, please clearly identify what is KS.  I suspect that KS is the Kolmogorov–Smirnov test?

Yes, it is Kolmogorov-Smirnov test. I have explained it in the paper. I Have added:

Before normalization, the test results showed a greater degree of non-normality using Kolmogorov-Smirnov test for a normal distribution (hereinafter referred to as KS) KS = 0.47; p <0.001 (DR),  line 364-364.

1. Line 331-332, Why?  Was this done in other empirical studies?  Also if the N is small and there is a large T panel dataset, the serial correlation becomes a major issue.  If the serial correlation is not a major issue, one could just use the robust (cluster) standard errors.

Ok, but the tested panel in the study has medium N and short T, so the serial correlation also is not a major issue. I have added in the text:

Due to the short duration of the panel (the panel in the study has medium N and short T), the autocorrelation, time delays and stationarity were not tested. Lines: 371-372.

And in Conclusions I added: (lines: 585-586)

There are a few limitations to the investigation: only WSE listed companies are taken, relatively medium number of observations and short duration.

1. In the title of Table 3 what is "Reconnoitring?"

In fact, the term is strange. I replaced them with the term Explanatory survey, Line 379.

1. It is not clear what is going on in Table 3.  There are four tests being used.  The Hausman Test examines "the random effects estimate is insignificantly different from the unbiased fixed effect estimate (Kennedy, 2008: 286)." In other words, if the null hypothesis is rejected, then the empirical analysis needs to use the fixed effects. 

Yes. In the circumstances where Hausman test is significant the fixed effects estimates are more appropriate, but there are also insignificant F test for individual effects. This test  points out that the means of dependent variables in panel groups are similar. In this situation OLS is unbiased and the data is more suited to this model.

I have also added in the text (below Table 3):

In the circumstances where Hausman test is significant the fixed effects estimates are more appropriate, but there are also insignificant F test for individual effects; this test points out that the means of dependent variables in panel groups are similar; in this situation OLS is unbiased and the data is more suited to this model. Lines: 384-387.

1. In tables 4, 5, and 6, there is a column called s.e. which is the standard errors.  Are the standard errors robust (clustered) standard errors? 

s.e. are estimated by the robust covariance matrix estimation.

I have added it in the tables: 4, 5, 6.

1.  In tables 5 and 6, the column designated as B should be B coefficient to be consistent with table 4. 

Corrected, Tables: 5, 6

1. What does the Arellano method show?  It is not clear from the present discussion. This reviewer is familiar with the Arellano-Bond estimator as used in the dynamic panel regression models.  Is this the use of the Arellano-Bond estimator?  From the discussion, it is not clear what the Arellano method is.

For the purposes to calculate this s.e. the plm R package was used. This package uses this formula Arellano M (1987) to calculate these corrected s.e  by heteroskedasticity and serial correlation consistent standard errors:

Arellano M (1987). “Computing Robust Standard Errors for Within-groups Estimators.” Oxford bulletin of Economics and Statistics, 49(4), 431–43

I have added this reference to the paper:

Adjustment of standard error and significance estimates due to the inspected hetero-scedasticity was conducted using the "ARELLANO" technique which rectifies the covariance matrix of the variables [73, 74]. Lines: 368-371

1. Under section 6, Conclusion, the discussion is not bad.  But the author should tie these results back to the literature.  How did the results of this paper compare to the results in earlier works in the literature? An elaboration back to the literature would be helpful and would strengthen this section. 

Section Discussion has been supplemented with a broader reference to the literature on the subject, mainly mentioned in the Introduction and in the second section.

I have added the references to the first sentence in Conclusions:

The study largely confirms the earnings management hypothesis [1, 2, 3, 4, 5, 6] but it expands the range of income measures, supplementing them with revenue and operating income. Lines: 482-484.

The results of Caylor's research were referred to:

The results were different from Caylor, where net earnings proved to be a significant benchmark in the use of discretionary revenue [7]. Lines: 494-496

Limited research on benchmarks other than net earnings was addressed:

This issue has so far been poorly addressed in the literature on the subject. Therefore, the following conclusions can be drawn from the investigation: predicted sales revenues and operating profit are important indicators of corporate performance and constitute an important benchmark in shaping discretionary revenues. Lines: 501-505.

References to research on the functions of managerial ownership in earnings management have been extended:

This may be in line with the scepticism hypothesis concerning the function of managerial ownership [61] and is incompatible with the alignment of interests hypothesis [15, 16, 17, 18, 30, 19, 20, 33]. The research results do not confirm, however the entrenchment hypothesis [55, 21, 22, 23, 24, 25] in terms of discretionary revenue as an earnings management instrument, if we take into account operating profit and net earnings benchmarks. The study does not analyse the curvilinear relationships in this respect, but there were no such grounds either, taking into account the results of previous investigations on earnings management in Poland [33, 49]. Therefore, we conclude that the function of managerial ownership in earnings management by means of discretionary revenue is important, but only in terms of achieving the revenue benchmark. However, it is not significant for operating income and net earnings benchmarks. Lines: 516-521.

References to other authors' research on the property concentration function have been supplemented:

In this case, the results are inconsistent with both the efficient monitoring hypothesis [12, 30] and the expropriation hypotheses [8, 9, 10, 11]. Therefore, they correspond more closely to the hypothesis claiming a correlation between earnings management and ownership concentration [52, 17, 53] and claiming the role of institutional investors [64, 65]. However, it is worth taking into account the fact that the study analysed the factor of the presence of a significant share of institutional investors in ownership, and not the presence of any proportion.

Lines: 531-537.

1. Line 483-484 rewrite the following from "In table 7, we introduce details on the...." to "Table 7 summarized the..."

Corrected, Line: 475

1. In line 494, there should be a comma before and after "in practice."

Corrected, line 603

1. In line 497, there should be a comma after investors. 

Corrected, line: 606.

1. The Data Availability Statement needs to be revised to replace the boilerplate language.

Corrected. I have introduced in the text:

Data supporting reported results can be found at: https://docs.google.com/spreadsheets/d/1sJFzk157QG18laI74kPXRo9hb5AQs9Zo/edit?usp=sharing&ouid=100540560577094310602&rtpof=true&sd=true

Lines: 612-614.

1. The author needs to discuss in the paper how does the content of this paper fit into the scope of sustainability?

In the Conclusions section, I have explained the relationship of my study with sustainability:

The paper also refers to issues of sustainable development. Financial pellucidity, containing clearness of transactions, is one of the mainstays of sustainability [75, 76]. The research sphere analysing the relationships between the ownership structure, monitoring activities through the accounting information and sustainability is an important part of contemporary finance and accounting [77, 78, 79, 80]. Earnings management influences monitoring activities of the enterprises, therefore it has a direct relationship with sustainability and economic performance [81, 82]. This study examines the motivators that influence the magnitudes of discretionary revenue, which is relevant to the security of economic transactions.

Lines: 595-603.

1. The references do not conform to the style guidelines as required by Sustainability, so the author needs to carefully revise the references. 

The issue will be discussed with the Editors. I have tried to keep the guidelines for literature references.

 

Andrzej Piosik

Round 2

Reviewer 3 Report

First, I really enjoyed reading this paper.  The paper was done well.  Here are my comments on this paper. 

1. Make sure that the literature review is written in past tense because the work has already been completed.  The latter comment can be similarly applied to the methods and results.
2. On line 80-81 should make note that it relates to sustainability. 
3. On line 83  it should be rewritten as "The novelty and originality of the paper is that the functions..."
4. On lines 122 and 123 it should be pandemic, not pandemia. 
5. On line 224, it remove the word "have."
6. On line 342, insert "the" before the Kolmogorov-Smirnov test.
7. On line 349-350, rewrite the sentence as follows:  "The panel in the study has a medium N and a short T." Take out "Due to the short duration of the panel..."  That is not needed. 
8. On line 474, after COVID-19 replace duration with pandemic. 
9. On lines 513-514, rewrite it as follows: "However, it is important note that ....."
10. Remove the sentence from line 596:  "The authors read and approved the final manuscript." It does not apply to this paper. 
11. The conflict of interest statement should be rewritten as: "The author declares no conflict of interest." 
12. The references still do not adhere to the requirements of Sustainability. 

Author Response

Dear Reviewer

Thank you very much for very valuable comments and recommendations for my article. The changes have been saved in ‘track changes’ mode and are saved in blue this time. All the Reviewer's recommendations were taken into account.

 

1. Make sure that the literature review is written in past tense because the work has already been completed.  The latter comment can be similarly applied to the methods and results.

In fact, I have used the present tense too often, especially with regard to literature review, methods, results, and conclusions. Consequently, I have corrected it in many places using the past tense. The changes concern many lines (mainly Introduction, Prior research, Results, and Conclusions) and are marked in blue in the revised version of the article.

Lines: Introduction (38-40, 45, 50, 78, 85, 88-90, 104, 113-117);

Prior research (135, 137, 139, 140, 159, 160, 162, 164, 168-171, 181, 184, 188, 191, 192, 198, 211, 215, 216);

Data and methodology (235, 237, 238, 241, 243-247, 251, 282, 295);

Results: (326, 348, 359, 415-420, 422, 423, 435, 440-456, 470-474, 477-479);

Conclusions: (564-566, 570, 572, 574, 576, 580-582, 584, 586, 595);

1. On line 80-81 should make note that it relates to sustainability. 

I have changed a sentence:

Section 6 described the research results and how they relate to the hypotheses, furthermore, I indicated what the added value of the paper is for sustainability. Line 91.

1. On line 83  it should be rewritten as "The novelty and originality of the paper is that the functions..."

Corrected, now the sentence is as follows:

The novelty and originality of the paper is that the functions of the elements of the ownership structure of enterprises were considered in the context of the avoidance of unfavourable deviations of the reported income from the consensus of analysts' income predictions. Lines: 103-106.

1. On lines 122 and 123 it should be pandemic, not pandemia. 

Corrected, Lines: 142-143.

1. On line 224, it remove the word "have."

Corrected, Line 247.

1. On line 342, insert "the" before the Kolmogorov-Smirnov test.

Corrected, Line 368.

1. On line 349-350, rewrite the sentence as follows:  "The panel in the study has a medium N and a short T." Take out "Due to the short duration of the panel..."  That is not needed. 

I changed the sentence:

The panel in the study has medium N and short T, therefore, the autocorrelation, time delays and stationarity were not tested. Lines: 375-376.

1. On line 474, after COVID-19 replace duration with pandemic. 

Corrected, Line 504.

1. On lines 513-514, rewrite it as follows: "However, it is important note that ....."

Corrected, Line 543

1. Remove the sentence from line 596:  "The authors read and approved the final manuscript." It does not apply to this paper. 

Corrected, Line 636.

1. The conflict of interest statement should be rewritten as: "The author declares no conflict of interest." 

Corrected, Line 637.

1. The references still do not adhere to the requirements of Sustainability. 

I received information from the Sustainability editorial office that the references list will be revised by Ms Fiona Wang. Ms Fiona Wang will do the layout to re-arrange the format after the paper is accepted (on a basis of the e-mail).

 

Best regards

Andrzej Piosik

This manuscript is a resubmission of an earlier submission. The following is a list of the peer review reports and author responses from that submission.