Reimbursement Costs of Auditing Financial Assets Measured by Fair Value Model in Jordanian Financial Firms’ Annual Reports

Comment

Response

Page No

Reviewer 1:

1. Thanks for the opportunity to revise the paper. I think that the authors did not answer my first comment: " The first and most important one is that this paper does not fall within the scope of the journal. This paper investigates a topic within the scope of audit research and has nothing to do with sustainability or sustainable development.". After reading the revised version of the paper, I did not find how and why this paper falls within the scope of this journal.

Many thanks and we do appreciate your valuable comment. To response on your respected comment please have a look at the following points:

1.     The main focus of this article is about the International Accounting Standards (IAS), Fair Value model in particular, NOT the auditing field only! Therefore, the current analysis aims to assist policy makers and standards setters in the sustainable development in FV standards, especially in developing countries which suffer the lack of empirical studies on this field. This analysis answers the call made by IASB to keep contributing in accounting literature to improve the knowledge about the consequences of the application of IFRSs (post-IFRS consequences) and the sustainable improvements in IFRSs especially those about FV model as this model caused very serious problems in the economies capital markets.    

2.     I am sure that you know that the editor scanned the paper appropriateness to the journal scope and filed. Therefore, once the paper has been sent to the reviewers this means that the editor approved its appropriateness to the Sustainability journal. 

3.     I have some publication in the same field published by Sustainability journal and no one of the editors or reviewers raised the same point.

4.     With all respect as you know Sustainability journal is multidisciplinary journal, it accepts articles from business background regardless of the topics. Please visit the journal Scimago website and kindly have a look at the scope of the journal, you can see that this journal is a multidisciplinary journal.

Thanks once again on your concern regarding this point and thanks for your contribution on our manuscript.

Comment

Response

Page No

Reviewer 1:

1. Thanks for the opportunity to revise the paper. I think that the authors did not answer my first comment: " The first and most important one is that this paper does not fall within the scope of the journal. This paper investigates a topic within the scope of audit research and has nothing to do with sustainability or sustainable development.". After reading the revised version of the paper, I did not find how and why this paper falls within the scope of this journal.

Many thanks and we do appreciate your valuable comment. To response on your respected comment please have a look at the following points:

1.     The main focus of this article is about the International Accounting Standards (IAS), Fair Value model in particular, NOT the auditing field only! Therefore, the current analysis aims to assist policy makers and standards setters in the sustainable development in FV standards, especially in developing countries which suffer the lack of empirical studies on this field. This analysis answers the call made by IASB to keep contributing in accounting literature to improve the knowledge about the consequences of the application of IFRSs (post-IFRS consequences) and the sustainable improvements in IFRSs especially those about FV model as this model caused very serious problems in the economies capital markets.    

2.     I am sure that you know that the editor scanned the paper appropriateness to the journal scope and filed. Therefore, once the paper has been sent to the reviewers this means that the editor approved its appropriateness to the Sustainability journal. 

3.     I have some publication in the same field published by Sustainability journal and no one of the editors or reviewers raised the same point.

4.     With all respect as you know Sustainability journal is multidisciplinary journal, it accepts articles from business background regardless of the topics. Please visit the journal Scimago website and kindly have a look at the scope of the journal, you can see that this journal is a multidisciplinary journal.

Thanks once again on your concern regarding this point and thanks for your contribution on our manuscript.

Reviewer 2:

1. In my opinion, it should be clearly justified how the study fits into the journal's objectives.

Many thanks and we do appreciate your valuable comment. To response on your respected comment please have a look at the following points:

1.     The main focus of this article is about the International Accounting Standards (IAS), Fair Value model in particular, NOT the auditing field only! Therefore, the current analysis aims to assist policy makers and standards setters in the sustainable development in FV standards, especially in developing countries which suffer the lack of empirical studies on this field. This analysis answers the call made by IASB to keep contributing in accounting literature to improve the knowledge about the consequences of the application of IFRSs (post-IFRS consequences) and the sustainable improvements in IFRSs especially those about FV model as this model caused very serious problems in the economies capital markets.   

2.     I am sure that you know that the editor scanned the paper appropriateness to the journal scope and filed. Therefore, once the paper has been sent to the reviewers this means that the editor approved its appropriateness to the Sustainability journal. 

3.     I have some publication in the same field published by Sustainability journal and no one of the editors or reviewers raised the same point.

4.     With all respect as you know Sustainability journal is multidisciplinary journal, it accepts articles from business background regardless of the topics. Please visit the journal Scimago website and kindly have a look at the scope of the journal, you can see that this journal is a multidisciplinary journal.

Thanks once again on your concern regarding this point and thanks for your contribution on our manuscript.

2. I have seen some improvements in the explanation of the sample. However, there are still some presentation errors, e.g. see page 11 first-line "I.S.A. 39" instead of "IAS 39". 

Thanks for your constructive comment. Revised as advised!

3. In the conclusions, I would suggest that you cross-reference your conclusions with some of the studies presented in the bibliographical references section.

Thanks for your constructive comment. Revised as advised!

4. Thanks for your appreciation and offer.

Best of luck with your study

Thanks for your appreciation and offer.

Reviewer 3:

First review

The topic of the article could be very interesting in the current economic context. In my opinion it is an application to a very specific country and with a very specific behavior. The authors do not explain how the analysis carried out in this study could be extrapolated to other settings or what it would contribute to the literature on the subject. 

However, since it may have an interest if the appropriate modifications are introduced and better justified your interest, I propose that the paper be accepted with major revisions.

Thank you for your comment.

Please be advised that we have justified the rationale behind choosing Jordan as a case scenario of this study in the body of the manuscript as follows:

Briefly,

Therefore, Jordan as a case scenario for this examination is selected for many reasons: firstly, results obtained from this examination can be generalised to the broader M.E. The growing interest in accounting research on M.E. nations is boosted by their similar heritage, political system, language, religion, beliefs, traditions, culture, etc. [17]. Secondly, the increasing use of financial instruments by Jordanian companies and the public about financial instrument losses reported in the media further encourages this examination to concentrate on F.V.A. of financial assets in Jordan [17]. Thirdly, Jordan is the only Arab country which requires listed firms to disclose the audit fees paid in their annual reports as a legal requirement and has done since 2001. Finally, the implementation of I.A.S./I.F.R.S. for almost 30 years in Jordan provides insightful evaluations on how F.V.M.s are prepared and audited under different circumstances [17].

1. The title should be more representative of the objective addressed in the paper

Thank you very much for you comment. Actually, the title in our revised version is consistent with the study’s conceptual framework addressing the reimbursement costs of auditing financial assets measured by FV model. The title focuses exactly on the main focus of the study FV model and the reimbursement costs of auditing FV model.

2. Best justification of the interest of the paper

This study aims to bridge this gap in auditing FV models by exploring the nature of the relationship between the FV model and reimbursement costs (i.e., audit fees), focusing on the principles-based framework (i.e., IFRS) instead of a rules-based framework (i.e., US GAAP). Second, test how each type of fair-valued asset is measured by the FV model as requested by IFRS/ISA on external auditor reimbursements in the context of Jordan for the first time. Furthermore, the findings of this research provide current empirical information on the F.V. model's implications in Jordan. The results contribute by guiding audit fee determinants in the context of Jordan, where the government determines no specific ceiling for audit fees. The outcomes guide regulatory authorities in monitoring and regulating the audit profession and regulating the audit of F.V. model practices.

See Abstract section, page 1.

3. The format of the paper should be improved in general:

2.1 The tables should be more integrated into the text and not jump as is the case with table 1.

2.2 The format of the equations is very careless and makes the equations unattractive. In addition, sub-indices of companies i and relative to the analysis period t must appear. Model parameters should represent numbers with subscripts, etc. The current format makes it very difficult to read and follow.

2.3 Not all tables are referenced in the text.

2.4 The figures in the Annex do not have numbers or titles. They are referenced in the text but an additional explanation must be given.

Thanks! Kindly, Table 1 is integrated into the text, after showing how the sample is produced (the steps and the logical construction of the sample) then table 1 & 2 directly presented in the same section following the discussion. The logic of presenting the tables is to be presented following the related discussion on the tables not before. This assists the reader to best understand the information mentioned in the tables.

 Please be informed that we followed the journal guideline regarding the paper structure and the equations presentation! Revised as advised!

Thanks! Please be informed that there is no table in the body of the manuscript lifted without links to the text. Revised as advised!

Revised as advised! Thanks

4. Regarding the database used, it is not properly specified.

Revised as advised! Thanks

Briefly,

“To confirm the best estimator of the current study, the models were tested using panel data first through Stata software.”

Research design section, page 12, paragraph 5, line 2.

5. Regarding the methodology, a greater justification of the use of the fixed effects model should be carried out, with the use of the corresponding endogeneity tests, choice of the fixed vs. random effects model, existence of dynamics in the dependent variable, etc.

Revised as advised! Thanks

Briefly,

“To confirm the best estimator of the current study, the models were tested using panel data first through Stata software. Hausman's test chooses between fixed and random effects. The analysis accepts the null hypothesis and confirms that the fixed effects model is more appropriate than random effects. The P-value of each Model is highly significant and lower than 5% (untabulated Hausman prob>chi2 ranged from 0.04 to 0.02). Therefore, it is evident that the fixed effects model is better for the multivariate analysis of the present study.”

Research design section, page 12, paragraph 5.

6. In general, the results must be more justified based on the models and hypotheses proposed and link with the results obtained.

Kindly see the discussion section.

Revised as advised! Thanks

7. The Sensitivity analysis section must be extended and justified with results

Kindly see the Sensitivity analysis section.

Revised as advised! Thanks

8. A review of the abstract and the conclusions must be carried out.

Revised as advised! Thanks

Second review:

1. In page 12 (see Tables A.1 and A.2 Appendix A). It is wrong, it would be the figures.

Revised as advised! Thanks

2. The title of figures A.1 and A.2 is not appropriate. 

Term error of which model or specification is it in Figure A.1?

In A.2 It is not understood to which probability it refers. More should be explained, either in the text when referenced on page 12 or in the annex.

An additional explanation must be given in the principal text when they are referenced.

Thanks for your comment. Please be informed that these figures are clearly explained in the Research design section as follows:

Briefly,

“Moreover, following preliminary analyses [55, 56, 53, 57], the current study uses the fixed effects regression technique. The research data must meet four fundamental assumptions that must be true for the regression analysis to be accurate to conduct the analysis. Regression assumptions are tested (including: first, Normality, Linearity, Homoscedasticity and Multicollinearity) and confirmed that the current data satisfies these assumptions (see Figures A.1 and A.2 Appendix A).”

Furthermore (additional explanations):

1.     Histogram with Normal Curve for the Error Terms: Residuals: in statistics the residual of the main model must be normally distributed to confirm the readability of the data to the analysis the 4 conditions as mentioned in the paper.

2.     As for using the Probability Plots is obtained to Identify Outliers or Significant Effects. Probability plots is useful to identify outliers or unusual values. The points located along the probability plot line represent “normal,” common, random variations.

3. The format of the equations is very careless and makes the equations unattractive. In the specification is necessary sub-indices in dependent variable and error term. It is basic.

Thanks for your comment. Please be informed that the equations include the whole tested variables and the error term as follows (kindly see section 4.2. Research design):

Equation (1): LnAFEES= δ0_it + δ1FV_TA_it + δ2SIZE_it + δ3SUBS_it + δ4ROI_it + δ5LEV_it + δ6GROWTH_it + δ7BLOCK_OWN_it + δ8FOR_OWN_it + δ9INST_OWN_it +δ10RECINV _it +δ11BIG4_it + δ12TENURE_it + δ13OPINION_it + IndFE _it + YearFE_it + ɛ.

Equation (2): LnAFEES= δ0_it + δ1FV_Option_it + + δ2SIZE_it + δ3SUBS_it + δ4ROI_it + δ5LEV_it + δ6GROWTH_it + δ7BLOCK_OWN_it + δ8FOR_OWN_it + δ9INST_OWN_it +δ10RECINV _it +δ11BIG4_it + δ12TENURE_it + δ13OPINION_it + IndFE _it + YearFE_it + ɛ.

Equation (3): LnAFEES= δ0_it + δ1FV_AFT_it+ + δ2SIZE_it + δ3SUBS_it + δ4ROI_it + δ5LEV_it + δ6GROWTH_it + δ7BLOCK_OWN_it + δ8FOR_OWN_it + δ9INST_OWN_it +δ10RECINV _it +δ11BIG4_it + δ12TENURE_it + δ13OPINION_it + IndFE _it + YearFE_it + ɛ.

Equation (4): LnAFEES= δ0_it + δ1FV_AFS_it + δ2SIZE_it + δ3SUBS_it + δ4ROI_it + δ5LEV_it + δ6GROWTH_it + δ7BLOCK_OWN_it + δ8FOR_OWN_it + δ9INST_OWN_it +δ10RECINV _it +δ11BIG4_it + δ12TENURE_it + δ13OPINION_it + IndFE _it + YearFE_it + ɛ.

See Research design section, pages 11-12.

4. The Sensitivity analysis section has been extended but the results should be commented.

Many thanks! Please be informed that the Sensitivity analyses results are presented in separate tables and the results presented in the tables and explained in each section and linked to the literature and the main analysis results.

5. The conclusions should be extended in relation to the results obtained.

Thanks for your constructive comment. Revised as advised!

Comment

Response

Page No

Reviewer 1:

1. Thanks for the opportunity to revise the paper. I think that the authors did not answer my first comment: " The first and most important one is that this paper does not fall within the scope of the journal. This paper investigates a topic within the scope of audit research and has nothing to do with sustainability or sustainable development.". After reading the revised version of the paper, I did not find how and why this paper falls within the scope of this journal.

Many thanks and we do appreciate your valuable comment. To response on your respected comment please have a look at the following points:

1.     The main focus of this article is about the International Accounting Standards (IAS), Fair Value model in particular, NOT the auditing field only! Therefore, the current analysis aims to assist policy makers and standards setters in the sustainable development in FV standards, especially in developing countries which suffer the lack of empirical studies on this field. This analysis answers the call made by IASB to keep contributing in accounting literature to improve the knowledge about the consequences of the application of IFRSs (post-IFRS consequences) and the sustainable improvements in IFRSs especially those about FV model as this model caused very serious problems in the economies capital markets.    

2.     I am sure that you know that the editor scanned the paper appropriateness to the journal scope and filed. Therefore, once the paper has been sent to the reviewers this means that the editor approved its appropriateness to the Sustainability journal. 

3.     I have some publication in the same field published by Sustainability journal and no one of the editors or reviewers raised the same point.

4.     With all respect as you know Sustainability journal is multidisciplinary journal, it accepts articles from business background regardless of the topics. Please visit the journal Scimago website and kindly have a look at the scope of the journal, you can see that this journal is a multidisciplinary journal.

Thanks once again on your concern regarding this point and thanks for your contribution on our manuscript.

Reviewer 2:

1. In my opinion, it should be clearly justified how the study fits into the journal's objectives.

Many thanks and we do appreciate your valuable comment. To response on your respected comment please have a look at the following points:

1.     The main focus of this article is about the International Accounting Standards (IAS), Fair Value model in particular, NOT the auditing field only! Therefore, the current analysis aims to assist policy makers and standards setters in the sustainable development in FV standards, especially in developing countries which suffer the lack of empirical studies on this field. This analysis answers the call made by IASB to keep contributing in accounting literature to improve the knowledge about the consequences of the application of IFRSs (post-IFRS consequences) and the sustainable improvements in IFRSs especially those about FV model as this model caused very serious problems in the economies capital markets.   

2.     I am sure that you know that the editor scanned the paper appropriateness to the journal scope and filed. Therefore, once the paper has been sent to the reviewers this means that the editor approved its appropriateness to the Sustainability journal. 

3.     I have some publication in the same field published by Sustainability journal and no one of the editors or reviewers raised the same point.

4.     With all respect as you know Sustainability journal is multidisciplinary journal, it accepts articles from business background regardless of the topics. Please visit the journal Scimago website and kindly have a look at the scope of the journal, you can see that this journal is a multidisciplinary journal.

Thanks once again on your concern regarding this point and thanks for your contribution on our manuscript.

2. I have seen some improvements in the explanation of the sample. However, there are still some presentation errors, e.g. see page 11 first-line "I.S.A. 39" instead of "IAS 39". 

Thanks for your constructive comment. Revised as advised!

3. In the conclusions, I would suggest that you cross-reference your conclusions with some of the studies presented in the bibliographical references section.

Thanks for your constructive comment. Revised as advised!

4. Thanks for your appreciation and offer.

Best of luck with your study

Thanks for your appreciation and offer.

Reviewer 3:

First review

The topic of the article could be very interesting in the current economic context. In my opinion it is an application to a very specific country and with a very specific behavior. The authors do not explain how the analysis carried out in this study could be extrapolated to other settings or what it would contribute to the literature on the subject. 

However, since it may have an interest if the appropriate modifications are introduced and better justified your interest, I propose that the paper be accepted with major revisions.

Thank you for your comment.

Please be advised that we have justified the rationale behind choosing Jordan as a case scenario of this study in the body of the manuscript as follows:

Briefly,

Therefore, Jordan as a case scenario for this examination is selected for many reasons: firstly, results obtained from this examination can be generalised to the broader M.E. The growing interest in accounting research on M.E. nations is boosted by their similar heritage, political system, language, religion, beliefs, traditions, culture, etc. [17]. Secondly, the increasing use of financial instruments by Jordanian companies and the public about financial instrument losses reported in the media further encourages this examination to concentrate on F.V.A. of financial assets in Jordan [17]. Thirdly, Jordan is the only Arab country which requires listed firms to disclose the audit fees paid in their annual reports as a legal requirement and has done since 2001. Finally, the implementation of I.A.S./I.F.R.S. for almost 30 years in Jordan provides insightful evaluations on how F.V.M.s are prepared and audited under different circumstances [17].

1. The title should be more representative of the objective addressed in the paper

Thank you very much for you comment. Actually, the title in our revised version is consistent with the study’s conceptual framework addressing the reimbursement costs of auditing financial assets measured by FV model. The title focuses exactly on the main focus of the study FV model and the reimbursement costs of auditing FV model.

2. Best justification of the interest of the paper

This study aims to bridge this gap in auditing FV models by exploring the nature of the relationship between the FV model and reimbursement costs (i.e., audit fees), focusing on the principles-based framework (i.e., IFRS) instead of a rules-based framework (i.e., US GAAP). Second, test how each type of fair-valued asset is measured by the FV model as requested by IFRS/ISA on external auditor reimbursements in the context of Jordan for the first time. Furthermore, the findings of this research provide current empirical information on the F.V. model's implications in Jordan. The results contribute by guiding audit fee determinants in the context of Jordan, where the government determines no specific ceiling for audit fees. The outcomes guide regulatory authorities in monitoring and regulating the audit profession and regulating the audit of F.V. model practices.

See Abstract section, page 1.

3. The format of the paper should be improved in general:

2.1 The tables should be more integrated into the text and not jump as is the case with table 1.

2.2 The format of the equations is very careless and makes the equations unattractive. In addition, sub-indices of companies i and relative to the analysis period t must appear. Model parameters should represent numbers with subscripts, etc. The current format makes it very difficult to read and follow.

2.3 Not all tables are referenced in the text.

2.4 The figures in the Annex do not have numbers or titles. They are referenced in the text but an additional explanation must be given.

Thanks! Kindly, Table 1 is integrated into the text, after showing how the sample is produced (the steps and the logical construction of the sample) then table 1 & 2 directly presented in the same section following the discussion. The logic of presenting the tables is to be presented following the related discussion on the tables not before. This assists the reader to best understand the information mentioned in the tables.

 Please be informed that we followed the journal guideline regarding the paper structure and the equations presentation! Revised as advised!

Thanks! Please be informed that there is no table in the body of the manuscript lifted without links to the text. Revised as advised!

Revised as advised! Thanks

4. Regarding the database used, it is not properly specified.

Revised as advised! Thanks

Briefly,

“To confirm the best estimator of the current study, the models were tested using panel data first through Stata software.”

Research design section, page 12, paragraph 5, line 2.

5. Regarding the methodology, a greater justification of the use of the fixed effects model should be carried out, with the use of the corresponding endogeneity tests, choice of the fixed vs. random effects model, existence of dynamics in the dependent variable, etc.

Revised as advised! Thanks

Briefly,

“To confirm the best estimator of the current study, the models were tested using panel data first through Stata software. Hausman's test chooses between fixed and random effects. The analysis accepts the null hypothesis and confirms that the fixed effects model is more appropriate than random effects. The P-value of each Model is highly significant and lower than 5% (untabulated Hausman prob>chi2 ranged from 0.04 to 0.02). Therefore, it is evident that the fixed effects model is better for the multivariate analysis of the present study.”

Research design section, page 12, paragraph 5.

6. In general, the results must be more justified based on the models and hypotheses proposed and link with the results obtained.

Kindly see the discussion section.

Revised as advised! Thanks

7. The Sensitivity analysis section must be extended and justified with results

Kindly see the Sensitivity analysis section.

Revised as advised! Thanks

8. A review of the abstract and the conclusions must be carried out.

Revised as advised! Thanks

Second review:

1. In page 12 (see Tables A.1 and A.2 Appendix A). It is wrong, it would be the figures.

Revised as advised! Thanks

2. The title of figures A.1 and A.2 is not appropriate. 

Term error of which model or specification is it in Figure A.1?

In A.2 It is not understood to which probability it refers. More should be explained, either in the text when referenced on page 12 or in the annex.

An additional explanation must be given in the principal text when they are referenced.

Thanks for your comment. Please be informed that these figures are clearly explained in the Research design section as follows:

Briefly,

“Moreover, following preliminary analyses [55, 56, 53, 57], the current study uses the fixed effects regression technique. The research data must meet four fundamental assumptions that must be true for the regression analysis to be accurate to conduct the analysis. Regression assumptions are tested (including: first, Normality, Linearity, Homoscedasticity and Multicollinearity) and confirmed that the current data satisfies these assumptions (see Figures A.1 and A.2 Appendix A).”

Furthermore (additional explanations):

1.     Histogram with Normal Curve for the Error Terms: Residuals: in statistics the residual of the main model must be normally distributed to confirm the readability of the data to the analysis the 4 conditions as mentioned in the paper.

2.     As for using the Probability Plots is obtained to Identify Outliers or Significant Effects. Probability plots is useful to identify outliers or unusual values. The points located along the probability plot line represent “normal,” common, random variations.

3. The format of the equations is very careless and makes the equations unattractive. In the specification is necessary sub-indices in dependent variable and error term. It is basic.

Thanks for your comment. Please be informed that the equations include the whole tested variables and the error term as follows (kindly see section 4.2. Research design):

Equation (1): LnAFEES= δ0_it + δ1FV_TA_it + δ2SIZE_it + δ3SUBS_it + δ4ROI_it + δ5LEV_it + δ6GROWTH_it + δ7BLOCK_OWN_it + δ8FOR_OWN_it + δ9INST_OWN_it +δ10RECINV _it +δ11BIG4_it + δ12TENURE_it + δ13OPINION_it + IndFE _it + YearFE_it + ɛ.

Equation (2): LnAFEES= δ0_it + δ1FV_Option_it + + δ2SIZE_it + δ3SUBS_it + δ4ROI_it + δ5LEV_it + δ6GROWTH_it + δ7BLOCK_OWN_it + δ8FOR_OWN_it + δ9INST_OWN_it +δ10RECINV _it +δ11BIG4_it + δ12TENURE_it + δ13OPINION_it + IndFE _it + YearFE_it + ɛ.

Equation (3): LnAFEES= δ0_it + δ1FV_AFT_it+ + δ2SIZE_it + δ3SUBS_it + δ4ROI_it + δ5LEV_it + δ6GROWTH_it + δ7BLOCK_OWN_it + δ8FOR_OWN_it + δ9INST_OWN_it +δ10RECINV _it +δ11BIG4_it + δ12TENURE_it + δ13OPINION_it + IndFE _it + YearFE_it + ɛ.

Equation (4): LnAFEES= δ0_it + δ1FV_AFS_it + δ2SIZE_it + δ3SUBS_it + δ4ROI_it + δ5LEV_it + δ6GROWTH_it + δ7BLOCK_OWN_it + δ8FOR_OWN_it + δ9INST_OWN_it +δ10RECINV _it +δ11BIG4_it + δ12TENURE_it + δ13OPINION_it + IndFE _it + YearFE_it + ɛ.

See Research design section, pages 11-12.

4. The Sensitivity analysis section has been extended but the results should be commented.

Many thanks! Please be informed that the Sensitivity analyses results are presented in separate tables and the results presented in the tables and explained in each section and linked to the literature and the main analysis results.

5. The conclusions should be extended in relation to the results obtained.

Thanks for your constructive comment. Revised as advised!

Comment

Response

Page No

Reviewer 1:

Thank you very much for your article improvements and argumentation about my doubts.

Many thanks and we do appreciate your valuable comments on the earlier version of this article.

Reviewer 2:

The relevant changes in the methodology and development of the results have not been included. A lack of mastery of the panel data methodology and its tests is noted.

These suggestions on the justification for estimating with fixed effects instead of other options like random, gmm, etc. they must be justified. There is talk of the Haussman test done in Stata but it is not put and there are other additional tests on endogeneity and existence of dynamics in the dependent variable, etc. that should have been included.

Thank you for your comment. All changes required by you in previous review were already included in the paper. The selection between Fixed effects and Random effects is something very clear in statistics and we believe that we followed the exact steps required to choose between the two methods and we mention the process of choosing Fixed effects method in details in section “4.2. Research design”.  We also, provided in this response a copy from Stata output regarding “Hausman” test result on the tested models which confirms that the prob>chi2 is significant which means “Fixed Effects” model is the most appropriate to be employed in the current study. As you know this work is a journal article, we cannot include all Stata outputs inside the article this will make it very long work (it is already now exceeding 25 pages). We respectfully believe that we replied to your comment. Thanks once again

Briefly, see 4.2. Research design section as follows:

“To confirm the best estimator of the current study, the models were tested using panel data first through Stata software. Hausman's test chooses between fixed and random effects. The analysis accepts the null hypothesis and confirms that the fixed effects model is more appropriate than random effects. The P-value of each Model is highly significant and lower than 5% (untabulated Hausman prob>chi2 ranged from 0.04 to 0.02). Therefore, it is evident that the fixed effects model is better for the multivariate analysis of the present study.”

2) An adequate specification of the equations, which has also not been introduced. In the specification is necessary sub-indices in dependent variable and error term. It is basic.

Thanks for your comment. We have applied all requirements mentioned by you in previous review and the rest requirements were already included in initial version of the paper.  All variables utilised in the equations are fully described and defined in a separate table (see table 3). The equations well prepared based on the tested models in the tables (8,9 & 10). All important details are included: independent variables in interest, control variables, fixed effects (year + industry) and the error term are all included.

 (kindly see the equations in section 4.2. Research design):

Equation (1): LnAFEES= δ0_it + δ1FV_TA_it + δ2SIZE_it + δ3SUBS_it + δ4ROI_it + δ5LEV_it + δ6GROWTH_it + δ7BLOCK_OWN_it + δ8FOR_OWN_it + δ9INST_OWN_it +δ10RECINV _it +δ11BIG4_it + δ12TENURE_it + δ13OPINION_it + IndFE _it + YearFE_it + ɛ.

Equation (2): LnAFEES= δ0_it + δ1FV_Option_it + + δ2SIZE_it + δ3SUBS_it + δ4ROI_it + δ5LEV_it + δ6GROWTH_it + δ7BLOCK_OWN_it + δ8FOR_OWN_it + δ9INST_OWN_it +δ10RECINV _it +δ11BIG4_it + δ12TENURE_it + δ13OPINION_it + IndFE _it + YearFE_it + ɛ.

Equation (3): LnAFEES= δ0_it + δ1FV_AFT_it+ + δ2SIZE_it + δ3SUBS_it + δ4ROI_it + δ5LEV_it + δ6GROWTH_it + δ7BLOCK_OWN_it + δ8FOR_OWN_it + δ9INST_OWN_it +δ10RECINV _it +δ11BIG4_it + δ12TENURE_it + δ13OPINION_it + IndFE _it + YearFE_it + ɛ.

Equation (4): LnAFEES= δ0_it + δ1FV_AFS_it + δ2SIZE_it + δ3SUBS_it + δ4ROI_it + δ5LEV_it + δ6GROWTH_it + δ7BLOCK_OWN_it + δ8FOR_OWN_it + δ9INST_OWN_it +δ10RECINV _it +δ11BIG4_it + δ12TENURE_it + δ13OPINION_it + IndFE _it + YearFE_it + ɛ.

Comment

Response

Page No

Reviewer 2:

Putting the value of the Haussman test and its p-value does not suppose a line and would be the minimum to justify the adequacy of the model. The reader does not care if it is obtained with Stata or with another program, but the value and its p-value are necessary.

Hausman is the basic in panel data regressions. Regarding, Stata, it is just one of the previous reviewers asked us to mention the software that we employed to do the analysis.

If you mean the values of Hausman, respectfully, we do not believe it is important to be mentioned in the article and we justified previously as this work is a journal article not a thesis and it must not be longer. Furthermore, we mention in the research design section the p-values of Hausman test.

Briefly in the research design section:

“The P-value of each Model is highly significant and lower than 5% (untabulated Hausman prob>chi2 ranged from 0.01 to 0.05). Therefore, it is evident that the fixed effects model is better for the multivariate analysis of the present study.”

In the equations, the subscript "t" is missing in the dependent variable and in the error term. But if the authors don't know the basics of an equation I'm not going to explain it to them.