Regional Investment Preferences and Corporate Cash Holdings: Evidence from China
Round 1
Reviewer 1 Report
a. Repeated use of 'on the other hand' in two consecutive sentences, line 24 and line 27
b. Line 54 is a repetition of line 42
c. lines 61-68 can be moved to the results and discussion section so as not to pre-empt the results in the introduction and also clearly show the correlation results.
d. Enlighten the reader early on by fully describing 'regional investment preferences' in line 79 and give examples so that it is not too general.
e. The phrase 'find that' has been overused in the article. Please rephrase some sentences.
f. Formulate your research hypothesis so that they are clear and concise. Also, the problem statement does not come out clearly to show the novelty of the paper. Some texts of the Research Hypothesis in Section 2.2 should be placed under the literature review Section 2.1. For example, Lines 189 to 193 are a repetition of statements already mentioned in the Lit review Section 2.1 or the Introduction.
g. In line 201, provide the link or URL for the data on China's Shanghai and Shenzhen A-share listed 201 companies from 2006 to 2020
h. Describe each of the variables in Equation 1 in line 212. What do Crash, Control, Industry, and Year represent or mean? They are not explained. The Crash variable is not used anywhere in the paper, yet it is the dependent variable in Equation 1
i. Are Cash 1 and Cash 2 explanatory or dependent variables? See line 258. Please clarify as this is confusing.
j. Is it Reinvest1 or reinvest1 ? see line 253
k. The authors must demonstrate sufficiently why they think that their model is a good fit and useful. Detailed descriptions of R2_squared, Shea's partial R2, Cragg-Donald Wald, Sargan test, etc., and their acceptable ranges may help explain in detail the model fit
l. Authors must demonstrate that the endogeneity problem exists i.e., the error term is correlated with the explanatory variables; for example, a test such as using a Hausman test can be used to test for endogeneity. (line 272). They should offer a sound justification for using the 2 stage least squares regression.
m. In line 304 please clarify which one is the control or processing group.
n. Show the results of the propensity score matching and the balance measures, such as the absolute standardized mean difference (ASMD), etc., to examine the balance of covariate distribution between the control or processing group.
Author Response
Dear reviewer,
Thank you for giving us the opportunity to 2nd round revise and resubmit the manuscript above. We sincerely thank you for providing us with invaluable and constructive suggestions which have improved our paper.
In accordance with the suggestions and comments from you, we have now revised our manuscript. We explain in detail below the revisions that we have made in response to each of the comments/suggestions made.
We hope that we have properly addressed all of your concerns in this revision. We look forward to hearing from you in due course.
Yours respectfully,
Corresponding Author
Thank you for your helpful comments and suggestions which have clearly improved our paper. We indicate below how we address each of your comments.
Reviewer 1：
[Comment 1] Repeated use of 'on the other hand' in two consecutive sentences, line 24 and line 27
[Reply 1] Thank you very much for your valuable comments. We have deleted 'on the other hand' in line 24 according to your suggestion.
[Comment 2] Line 54 is a repetition of line 42
[Reply 2] Thank you very much for your valuable comments. We delete the duplicates in Line 54 according to your suggestion.
[Comment 3] lines 61-68 can be moved to the results and discussion section so as not to pre-empt the results in the introduction and also clearly show the correlation results.
[Reply 3] Thank you very much for your valuable comments. According to your suggestion, we have put the contents of 61-68 in the results and discussion section
[Comment 4] Enlighten the reader early on by fully describing 'regional investment preferences' in line 79 and give examples so that it is not too general.
[Reply 4] Thank you very much for your valuable comments. 'regional investment preferences' in line 79 is mainly to illustrate the main contributions of this article. Many scholars have studied the factors that affect the cash holdings of enterprises before, but few scholars have studied whether the environment of the region where the enterprise is located can affect the cash holdings of enterprises. In addition, 'regional investment preferences' are described in detail in the introduction and assumptions. However, according to the suggestions of the author, we have added relevant literature in this part. What scholars have studied corporate cash holdings before and have been revised in the article.
[Comment 5] The phrase 'find that' has been overused in the article. Please rephrase some sentences.
[Reply 5] Thank you very much for your valuable comments. We have modified some 'find that' in the article according to your requirements.
[Comment 6] Formulate your research hypothesis so that they are clear and concise. Also, the problem statement does not come out clearly to show the novelty of the paper. Some texts of the Research Hypothesis in Section 2.2 should be placed under the literature review Section 2.1. For example, Lines 189 to 193 are a repetition of statements already mentioned in the Lit review Section 2.1 or the Introduction.
[Reply 6] Thank you very much for your valuable comments. I have changed the assumptions according to your requirements. However, we have explained the novelty of the article in the last paragraph of the introduction (three contributions of this article). In addition, the literature review and hypothesis in many accounting and financial articles are separated. Some literature references in the hypothesis are used to better elicit the hypothesis. If the literature in the hypothesis is removed, the hypothesis will not be convincing. The contents of Lines 189 to 193 are repetitive with some languages in the introduction. We have modified the repetitive part in the introduction.
[Comment 7] In line 201, provide the link or URL for the data on China's Shanghai and Shenzhen A-share listed 201 companies from 2006 to 2020
[Reply 7] Thank you very much for your valuable comments. The data we use mainly comes from Csmar and Wind databases The website of Csmar databases is http://cndata1.csmar.com/ , the website of Wind databases is https://www.wind.com.cn/.
[Comment 8] Describe each of the variables in Equation 1 in line 212. What do Crash, Control, Industry, and Year represent or mean? They are not explained. The Crash variable is not used anywhere in the paper, yet it is the dependent variable in Equation 1
[Reply 8] Thank you very much for your valuable comments. We are very sorry that we mistook "cash" for "crash" due to a clerical error. Industry and Year refers to the fixed effect of controlling industry and year. In order to let you understand the meaning of each variable more clearly, we have reconstructed Table 1 and explained each variable.
[Comment 9] Are Cash 1 and Cash 2 explanatory or dependent variables? See line 258. Please clarify as this is confusing.
[Reply 9] Thank you very much for your valuable comments. Cash 1 and Cash 2 are dependent variables (interpreted variables). This paper mainly studies the impact of regional investment preference on corporate cash holdings. Therefore, cash holdings are dependent variables (explained variables).
[Comment 10] Is it Reinvest1 or reinvest1 ? see line 253
[Reply 10] Thank you very much for your valuable comments. Due to a clerical error, we wrote "Reinvest" as "reinvest". We have corrected all similar errors in this article.
[Comment 1] The authors must demonstrate sufficiently why they think that their model is a good fit and useful. Detailed descriptions of R2_squared, Shea's partial R2, Cragg-Donald Wald, Sargan test, etc., and their acceptable ranges may help explain in detail the model fit
[Reply 11] Thank you very much for your valuable comments.
Generally speaking, the larger the R-Squared is, the better the model fitting effect is. R-Square reflects how accurate it is. As the number of samples increases, R-Square will inevitably increase. It cannot truly quantify the accuracy, but only roughly quantify. For financial and accounting literature, the R-Square value is mostly between 0.1 and 0.2.
Shea's partial R2 refers to the explanatory power of other variables on an endogenous variable under the premise of controlling the influence of exogenous variables in the first stage of regression, or the influence of exogenous variables is eliminated in the first stage of regression. Its value is reasonable from 0 to 1.
At present, most scholars use F-statistics>10 to test weak tool problems. Therefore, when - statistics>10, the results are effective.
Sargan statistics. If the number of endogenous variables is exactly the same as the number of tool variables. There is no need to perform an over identification test at this time because the model is properly validated. In this case, the value of Sargan statistic is required to be greater than 1.
As the above test results are common methods of instrumental variable method, accounting or financial scholars often use them. I have referred to a lot of relevant literature, and basically no scholar has specifically described these test methods in the robustness test. Therefore, we have carried out a simple discussion in this paper.
[Comment 12] Authors must demonstrate that the endogeneity problem exists i.e., the error term is correlated with the explanatory variables; for example, a test such as using a Hausman test can be used to test for endogeneity. (line 272). They should offer a sound justification for using the 2 stage least squares regression.
[Reply 12] Thank you very much for your valuable comments. We have considered your suggestion very carefully, but we have referred to many literatures, and it may be more appropriate for us to do so. An article "Gambling preferences and stock price crash risk: Evidence from China" published in the Journal of Banking and Finance and "email attention, retail tracks, and stock price crash risk" published in the Emerging Markets Review. This article may have endogenous problems caused by missing variables. Therefore, this article has carried out the tool variable method, namely, Propensity Score Matching, Identify the interaction of regional economic development level, Identify the interaction of local residents investing in local listed companies To some extent, we have proved the robustness of the results.
[Comment 13] In line 304 please clarify which one is the control or processing group.
[Reply 13] Thank you very much for your valuable comments. We define the control group as those companies in the top quartile with the strongest regional investment preference each year, and the control group as those companies in the bottom quartile with the weakest regional investment preference each year.
[Comment 14] Show the results of the propensity score matching and the balance measures, such as the absolute standardized mean difference (ASMD), etc., to examine the balance of covariate distribution between the control or processing group.
[Reply 14] Thank you very much for your valuable comments. We have previously examined the balance of the distribution of covariates between the control or processing groups. However, with reference to many literatures, this part of data is not shown in the paper. For example, the Journal of Banking and Finance published an article "Gambling preferences and stock price crash risk: Evidence from China"
Author Response File: 
Author Response.docx
Reviewer 2 Report
I would like to thank the authors for their efforts making this interesting paper. I would like to suggest some minor improvements.
1- There are many cases of missing citing a reference. For example, I can see some claims in the introduction section without referring to the original works. This concern is applicable to section of literature review and research hypothesis section. Doing so makes any claim or argument more credible.
2- Make sure the board size is measured correctly as the mean is around 2 and the maximum value is also around 2. This may suggest that it is measured by log. Whatever measure is used, since it is consistent with prior research, please make sure the inserted variable is correctly measured.
3- I highly recommend the authors to add a table for variable definitions.
4- The authors should indicate the econometric method used to analyze the data. The structure of the data is panel but it is not clear what type of panel data model is used and based on what test this method is chosen. Based on the results in the tables, I can guess the pooled OLS is used but not discussed when indicating the research model. I also encourage the authors to report what panel data assumptions are checked and, if any, how the issue is corrected.
5- The authors should discuss how the economic significance is computed and what literature is used as a basis for this computation.
6- The authors should expand the discussion in the conclusion section concerning the implications and limitations. They should clearly articulate who are going to benefit from these results and how they can benefit. Further, no research is escaped from limitations and these limitations may extend the future research. So, the authors should discuss the limitations and suggest the avenues of future research.
7- There are some typos errors needing careful editing. I highly recommend the authors to consult a professional editor to address these issues.
Good luck in the future version.
Author Response
Dear reviewer,
Thank you for giving us the opportunity to 2nd round revise and resubmit the manuscript above. We sincerely thank you for providing us with invaluable and constructive suggestions which have improved our paper.
In accordance with the suggestions and comments from you, we have now revised our manuscript. We explain in detail below the revisions that we have made in response to each of the comments/suggestions made.
We hope that we have properly addressed all of your concerns in this revision. We look forward to hearing from you in due course.
Yours respectfully,
Corresponding Author
Thank you for your helpful comments and suggestions which have clearly improved our paper. We indicate below how we address each of your comments.
Reviewer 2：
[Comment 1] There are many cases of missing citing a reference. For example, I can see some claims in the introduction section without referring to the original works. This concern is applicable to section of literature review and research hypothesis section. Doing so makes any claim or argument more credible.
[Reply 1] Thank you very much for your valuable comments. We have added some references as suggested by the reviewers, such as "Cash holdings, the internal capital market, and capital allocation efficiency in listed companies", "Former CEO directors and cash holdings", "Impact of economic policy uncertainty on cash holdings: firm level evidence from an emerging market", and so on.
[Comment 2] Make sure the board size is measured correctly as the mean is around 2 and the maximum value is also around 2. This may suggest that it is measured by log. Whatever measure is used, since it is consistent with prior research, please make sure the inserted variable is correctly measured.
[Reply 2] Thank you very much for your valuable comments. We recollected the data on the size of the board of directors, and the result is still that the average value is 2.1460, and the maximum value is 2.7081. And we have referred to a large number of literatures, and the size of the board of directors in other literatures is close to our results.
[Comment 3] I highly recommend the authors to add a table for variable definitions.
[Reply 3] Thank you very much for your valuable comments. We have followed the reviewer's suggestion to add a table for variable definitions, as shown in Table 1.
[Comment 4] The authors should indicate the econometric method used to analyze the data. The structure of the data is panel but it is not clear what type of panel data model is used and based on what test this method is chosen. Based on the results in the tables, I can guess the pooled OLS is used but not discussed when indicating the research model. I also encourage the authors to report what panel data assumptions are checked and, if any, how the issue is corrected.
[Reply 4] Thank you very much for your valuable comments. We conducted regression analysis according to model 1, and the results in table 3 verified hypothesis H1b, which we modified in the original text. Our research mainly uses OLS regression, which may have endogenous problems. However, we have carried out robustness tests in the article, such as using instrumental variable method and propensity matching score method, and the results remain unchanged.
[Comment 5] The authors should discuss how the economic significance is computed and what literature is used as a basis for this computation.
[Reply 5] Thank you very much for your valuable comments. We have deleted the economic meaning because the analysis of economic meaning is more in China than in other countries. Therefore, we have deleted the description of economic meaning in the original text.
[Comment 6] The authors should expand the discussion in the conclusion section concerning the implications and limitations. They should clearly articulate who are going to benefit from these results and how they can benefit. Further, no research is escaped from limitations and these limitations may extend the future research. So, the authors should discuss the limitations and suggest the avenues of future research.
[Reply 6] Thank you very much for your valuable comments. According to the requirements of the reviewers, we wrote about the shortcomings and limitations of this article in the conclusion part of the article.
[Comment 7] There are some typos errors needing careful editing. I highly recommend the authors to consult a professional editor to address these issues.
[Reply 7] Thank you very much for your valuable comments. We hired a professional organization to revise the article, and the grammar and words have been revised.
Author Response File: Author Response.docx
Reviewer 3 Report
While the empirical analysis is well structured and thoroughly performed, I am not entirely convinced of the overall research strategy and, in particular, about the hypothesis development.
On the one hand, the authors present two opposing null hypotheses to test, so the study looks tentative rather than searching for a support to well-defined theories on the issue.
In addition, to support the first hypothesis the authors state that /page 3, lines 146-149) "When the investment preference of a region is stronger, the management of listed companies in the region will increase investment, which will lead to a decrease in the company's cash holdings." However, there is no specific reference to the literature about why it should be so. And is it like the authors state? If investors are keener to buy shares. shouldn't firms have greater access to capital, and, hence, may rely less on internal funds? Couldn't this lead to a higher level of cash, for the same level of corporate investments, since firms can more easily raise external funds and stockpile cash?
The second hypothesis is very poorly defined, and it looks very confusing. Why if investors are more willing to invest, there should be higher external risk? What reference in the literature can the authors provide to support this argument?
Also, it is not clear how their main independent variable is obtained. How do they connect trading volumes with regions? Is it based on the city of incorporation of a company? Based on the location of the trader? Or on the location of the final investor?
Author Response
Dear reviewer,
Thank you for giving us the opportunity to 2nd round revise and resubmit the manuscript above. We sincerely thank you for providing us with invaluable and constructive suggestions which have improved our paper.
In accordance with the suggestions and comments from you, we have now revised our manuscript. We explain in detail below the revisions that we have made in response to each of the comments/suggestions made.
We hope that we have properly addressed all of your concerns in this revision. We look forward to hearing from you in due course.
Yours respectfully,
Corresponding Author
Thank you for your helpful comments and suggestions which have clearly improved our paper. We indicate below how we address each of your comments.
Reviewer 3：
[Comment 1] On the one hand, the authors present two opposing null hypotheses to test, so the study looks tentative rather than searching for a support to well-defined theories on the issue.
[Reply 1] Thank you very much for your valuable comments. A large number of literatures have proposed two completely opposite hypotheses, because for independent variables and dependent variables, there may also be positive correlation or negative correlation. Therefore, only through regression analysis can we know what the result is. However, we do not simply draw a conclusion, but will analyze the mechanism and explain the reasons after we draw a conclusion
[Comment 2] In addition, to support the first hypothesis the authors state that /page 3, lines 146-149) "When the investment preference of a region is stronger, the management of listed companies in the region will increase investment, which will lead to a decrease in the company's cash holdings." However, there is no specific reference to the literature about why it should be so.
[Reply 2] Thank you very much for your valuable comments. We have added relevant literature, “The Cash Holdings and Corporate Investment Surrounding Financial Crisis: The Cases of China and Taiwan”. For example, if the company's cash holdings are a fixed value, and the company's investment consumes some of the cash, then the company's remaining cash will be reduced from the beginning.
[Comment 3] If investors are keener to buy shares. shouldn't firms have greater access to capital, and, hence, may rely less on internal funds? Couldn't this lead to a higher level of cash, for the same level of corporate investments, since firms can more easily raise external funds and stockpile cash?
[Reply 3] Thank you very much for your valuable comments. This paper mainly studies the relationship between regional investment preference and corporate cash holdings. There are 34 provinces in China, and investors in each province can not only invest in local enterprises, but also invest in enterprises in other provinces. In this paper, regional investment preference refers to the ratio of per capita stock investment to per capita income in a province, that is, what percentage of income the province is willing to invest. The company in this paper mainly refers to the company in this province. Therefore, the purchase and sale of stocks by investors in this province has nothing to do with the company's ability to raise funds. In other words, the money of investors in this region does not necessarily flow into local enterprises.
[Comment 4] The second hypothesis is very poorly defined, and it looks very confusing. Why if investors are more willing to invest, there should be higher external risk? What reference in the literature can the authors provide to support this argument?
[Reply 4] Thank you very much for your valuable comments. The Journal of Banking and Finance published an article "Gambling preferences and stock price crash risk: Evidence from China", which measured Gambling preferences in terms of lottery transactions per capita in each province, and the results showed that the greater the Gambling preferences in a region, the higher the stock price crash risk in the area.
[Comment 5] Also, it is not clear how their main independent variable is obtained. How do they connect trading volumes with regions? Is it based on the city of incorporation of a company? Based on the location of the trader? Or on the location of the final investor?
[Reply 5] Thank you very much for your valuable comments. The independent variable of this paper is the ratio of per capita stock investment and per capita income of a province, that is, what percentage of income the province is willing to invest. There are 34 provinces in China. Each province has a per capita stock trading volume and per capita income every year, and then different enterprises in this province have cash holdings every year. In other words, investors and enterprises in the same province are defined as the same region.
Author Response File: Author Response.docx
Reviewer 4 Report
Review of the article “Regional investment preferences and corporate cash holdings: 2 evidence from China”
The article is written with a smooth writing style. If there were any spelling or grammar mistakes they were undetectable to me. There were some typo mistakes (e.g. lines 35), however, as I understand, they are purely technical and will be eliminated. The article is not based on extensive literature which shows that the authors did not make thorough, accurate, and up-to-date literature review.
As regards proposed methodology of the article it has to be noticed that it could be more scientifically advanced. The design of the research is based on estimating linear model. Unfortunately, such approach has limited power because of two reasons: (1) it allows to estimate linear relationships between variables and (2) if adj. R^2 coefficient is small conclusions resulting from the model are debatable. That is why, from methodological point of view, the article could be improved or some conclusions could be changed.
On the other side, the authors of the article correctly explained and performed the research they proposed. From this point of view I have no objections to the article.
Summing up, I recommend to publish the article after minor improvements suggested above.
Author Response
Dear reviewer,
Thank you for giving us the opportunity to 2nd round revise and resubmit the manuscript above. We sincerely thank you for providing us with invaluable and constructive suggestions which have improved our paper.
In accordance with the suggestions and comments from you, we have now revised our manuscript. We explain in detail below the revisions that we have made in response to each of the comments/suggestions made.
We hope that we have properly addressed all of your concerns in this revision. We look forward to hearing from you in due course.
Yours respectfully,
Corresponding Author
Thank you for your helpful comments and suggestions which have clearly improved our paper. We indicate below how we address each of your comments.
Reviewer 4：
[Comment 1] The article is not based on extensive literature which shows that the authors did not make thorough, accurate, and up-to-date literature review.
[Reply 1] Thank you very much for your valuable comments. We recollected the latest relevant literature in recent years.
[Comment 2] The design of the research is based on estimating linear model. Unfortunately, such approach has limited power because of two reasons: (1) it allows to estimate linear relationships between variables and (2) if adj. R2 coefficient is small conclusions resulting from the model are debatable. That is why, from methodological point of view, the article could be improved or some conclusions could be changed.
[Reply 2] Thank you very much for your valuable comments. (1) Although the OLS model has limitations, it is widely used in accounting and financial research, because at present there is no better regression method. There may be missing variables in this measurement method, so this paper uses the instrumental variable method and propensity matching score method and other robustness tests, but the results remain unchanged. (2) I agree with the reviewer that the adj R2 coefficient in this paper is relatively small. However, the adj R2 coefficients in this paper are basically above 0.1, and the independent variable coefficients are significant at the level of 1%, indicating that the regression results are significant.
Author Response File: Author Response.docx
Reviewer 5 Report
I think that the title of the paper reflects the content of the work and that it has sufficient technical depth for a scientific publication, after minor improvements. The work is clear and easy to read. Thus, some notes for analysis are presented:
- In the introduction, and given that even uses the word "At present" 3 times, I would like to have seen reference to more recent authors before the end of it; or, alternatively, I suggest deleting the expression "At present" in line 33 and 50.
- Point 2 is the same as point 2.1 (line 89 and 90); I suggest either deleting the sub-points (2.1 and 2.2), or reformulating it, with point 2.1 being only a review point (the state of the art). However the 1st paragraph of point 2.2 is also state of the art, and should be incorporated into 2.1, keeping the division into 2.1 and 2.2. In point 2.2. you raise only 2 hypotheses, but in line 11 you refer to "Additional studies....", as well as in point 6. of the paper. I seem to see no reference to this additional study in the introduction and in the hypotheses section. Is it not relevant? In section 7, conclusions, line 492, I think (?) it presents conclusions of the additional study, based on what was presented in section 6. and for which no hypothesis was raised.
- In item 4. (line 246) there is the analysis of the previous hypotheses (line 247):
H1a: regional investment preference is negatively related to corporate cash holdings.
H1b: regional investment preference is positively correlated with corporate cash holdings.
In reality it is not just a hypothesis? The relationship, if it exists, is either positive or negative. Right? So, I suggest, in view of all the review presented and information described, the analysis and reformulation of the hypotheses raised.
In the abstract it states: "The mechanism test shows that the regional investment preference can increase the preventive cash holding and strategic cash holding motivation of enterprises, so as to improve the cash holding level of companies. Further research shows that strict internal control and external supervision can weaken the impact of regional investment preference on corporate cash holdings." But it does not hypothesize. Wouldn't that be relevant?
- Point 6, line 399, spaces to be eliminated, in the authors presented.
- Point 7, conclusions, seems poor in view of the work presented. I don't see limitations of the study and future research clues.
- In the citations, I suggest the observation of the standards of the journal, as well as throughout the paper; I would have liked to see more references throughout the paper and more recent references on the topic under study.
Author Response
Dear reviewer,
Thank you for giving us the opportunity to 2nd round revise and resubmit the manuscript above. We sincerely thank you for providing us with invaluable and constructive suggestions which have improved our paper.
In accordance with the suggestions and comments from you, we have now revised our manuscript. We explain in detail below the revisions that we have made in response to each of the comments/suggestions made.
We hope that we have properly addressed all of your concerns in this revision. We look forward to hearing from you in due course.
Yours respectfully,
Corresponding Author
Thank you for your helpful comments and suggestions which have clearly improved our paper. We indicate below how we address each of your comments.
Reviewer 5：
[Comment 1] In the introduction, and given that even uses the word "At present" 3 times, I would like to have seen reference to more recent authors before the end of it; or, alternatively, I suggest deleting the expression "At present" in line 33 and 50.
[Reply 1] Thank you very much for your valuable comments. We deleted the expression "At present" in line 33 and 50 as suggested by the reviewers.
[Comment 2] Point 2 is the same as point 2.1 (line 89 and 90); I suggest either deleting the sub-points (2.1 and 2.2), or reformulating it, with point 2.1 being only a review point (the state of the art). However the 1st paragraph of point 2.2 is also state of the art, and should be incorporated into 2.1, keeping the division into 2.1 and 2.2. In point 2.2. you raise only 2 hypotheses, but in line 11 you refer to "Additional studies....", as well as in point 6. of the paper. I seem to see no reference to this additional study in the introduction and in the hypotheses section. Is it not relevant? In section 7, conclusions, line 492, I think (?) it presents conclusions of the additional study, based on what was presented in section 6. and for which no hypothesis was raised.
[Reply 2] Thank you very much for your valuable comments. As the literature review and research hypothesis are different parts, we rewrote the titles of 2.1 and 2.2. In accounting and finance articles, "Further research" is very common. It is an extension of the main regression results. Some literatures call it "Cross section analysis". In many literatures, "Further research" is not assumed.
[Comment 3] In item 4. (line 246) there is the analysis of the previous hypotheses (line 247): In reality it is not just a hypothesis? The relationship, if it exists, is either positive or negative. Right? So, I suggest, in view of all the review presented and information described, the analysis and reformulation of the hypotheses raised.
[Reply 3] Thank you very much for your valuable comments. A large number of literatures have proposed two completely opposite hypotheses, because for independent variables and dependent variables, there may also be positive correlation or negative correlation. Therefore, only through regression analysis can we know what the result is. However, we do not simply draw a conclusion, but will analyze the mechanism and explain the reasons after we draw a conclusion
[Comment 4] In the abstract it states: "The mechanism test shows that the regional investment preference can increase the preventive cash holding and strategic cash holding motivation of enterprises, so as to improve the cash holding level of companies. Further research shows that strict internal control and external supervision can weaken the impact of regional investment preference on corporate cash holdings." But it does not hypothesize. Wouldn't that be relevant?
[Reply 4] Thank you very much for your valuable comments. The main regression results of this paper show that the regional investment preference is negatively related to the cash holdings of enterprises, and through the mechanism test, it is found that the regional investment preference can increase the preventive cash holdings and strategic cash holdings motivation of enterprises, thus improving the cash holdings of companies. The results of mechanism analysis are written in the fifth part of the article. It is appropriate for us to write mechanism analysis in the abstract, because many accounting and financial literature will do so.
[Comment 5] line 399, spaces to be eliminated, in the authors presented.
[Reply 5] Thank you very much for your valuable comments. We follow the reviewer's advice and put Point 6, line 399, spaces to be eliminated.
[Comment 6] conclusions, seems poor in view of the work presented. I don't see limitations of the study and future research clues.
[Reply 6] Thank you very much for your valuable comments. As suggested by the reviewers, we wrote about the shortcomings and limitations of the article in the concluding part of the article.
[Comment 7] In the citations, I suggest the observation of the standards of the journal, as well as throughout the paper; I would have liked to see more references throughout the paper and more recent references on the topic under study.
[Reply 7] Thank you very much for your valuable comments. We have recollected the latest relevant literature from recent years.
Author Response File: Author Response.docx
Round 2
Reviewer 1 Report
I am satisfied with the changes and responses that the authors made to improve the paper
Reviewer 3 Report
No further comments. The authors replied to all my previous comments.
