Examining the Quadratic Impact of Sovereign Environmental, Social, and Governance Practices on Firms’ Profitability: New Insights from the Financial Industry in Gulf Cooperation Council Countries

Round 1

Reviewer 1 Report

Comments and Suggestions for Authors

Abstract:

Authors need to highlight the aim of the research and justify what is the relevance of this study.

4.1 Data and Methods

Please list GCC countries in first sentence. Authors should explain why did not include liquidity as one of the most important bank-specific determinants of profitability?

Conclusions:

This section should be improved. Authors should compare the obtained findings to previous empirical studies that have analyzed bank profitability in terms of ESG practice, as well as indicate whether there are deviations or similarities regarding the impact of explanatory variables and reasons for these different result. The main added value of the paper and the failures of the study must be highlighted.

Author Response

Response to reviewer 1

Author Response File: Author Response.pdf

Reviewer 2 Report

Comments and Suggestions for Authors

Dear authors,

Overall, the study has been rigorously conducted. However, there are some portions that require improvements. Based on the extent of improvements required, I suggest a minor revision. Below please find my detailed comments:

Introduction

- Begin with a brief statement about the broader context of the problem you're addressing. Why is understanding the effects of the combined and individual sovereign environmental, social, and governance (ESG) activities on the banking sector’s profitability important?

Methodology and data

- Justify the use of fixed effects in your estimations. E.g. was this indicated from a Hausmann test?

- Explain the data cleaning and preparation processes in more detail. This might involve steps like handling missing data, dealing with outliers, or any transformations applied to the data.

Conclusion and policy implication

- Sub-section 7.1 merely reiterates the results. The authors should kindly strengthen this sub-section. It is recommended also to change the title “Summary of our findings” with “Conclusions”.

- The policy implications should be directly derived from the discussion of the results, and they should not go beyond the results. Please revise accordingly.

I wish you all the best in your revisions and improving your manuscript.

Author Response

Response to reviewer 2

Author Response File: Author Response.pdf

Reviewer 3 Report

Comments and Suggestions for Authors

Sovereign ESG Practices and Firms' Profitability? New Insights from the Financial Industry in GCC Countries

 

The current study aims to investigate the quadratic effects of sovereign entities' combined and individual environmental, social, and governance (ESG) activities on the banking sector's profitability. Additionally, this research endeavors to elucidate the mechanisms through which sovereign ESG practices influence the banking industry's profitability. The main idea of the research sounds exciting, and the results are presented well. However, the article needs a major revision, especially in the introduction and literature review parts, to be considered for publication. The following comments could improve the quality of the present research.

Introduction

Are there any studies closely related to the present study regarding methodology, research gap, or even case study? The author should compare the present study with the closely related studies to highlight the novelty of the research.

The research gap is hard to get. The authors are expected to present research gaps, what they look for in the present research, and how they will solve the problem. What problems and gaps do the authors want to address and fill?

Avoid self-citation. The following studies were cited many times but were not helpful or supportive! The word "Athari" appeared in the text more than 40 times! Remove them!

Athari, S. A. (2021). Domestic political risk, global economic policy uncertainty, and banks' profitability: evidence 929 from Ukrainian banks. Post-Communist Economies, 33(4), 458-483. 

Athari, S. A. (2022). Examining the impacts of environmental characteristics on Shariah-based bank's capital hold-931 ings: role of country risk and governance quality. The Economics and Finance Letters, Forthcoming. 

Athari, S. A., & Bahreini, M. (2023). The impact of external governance and regulatory settings on the profitability 933 of Islamic banks: Evidence from Arab markets. International Journal of Finance & Economics, 28(2), 2124-2147

Athari, S. A., & Irani, F. (2022). Does the country's political and economic risks trigger risk-taking behavior in the 935 banking sector: new insight from the regional study—Journal of Economic Structures, 11(1), 32. 

Athari, S. A., Saliba, C., Khalife, D., & Salameh-Ayanian, M. (2023). The Role of Country Governance in Achieving 937 the Banking Sector's Sustainability in Vulnerable Environments: New Insight from Emerging Economies. Sustain-938 ability, 15(13), 10538. 

Saliba, C., Farmanesh, P., & Athari, S. A. (2023). Does country risk impact the banking sectors' non-performing 1156 loans? Evidence from BRICS emerging economies. Financial Innovation, 9(1), 1-30. 

Literature Review 

Need to rewrite. The authors followed an old-fashioned way of presenting a literature review. Avoid one-sentence presentations, such as "Bihari and Pradhan (2011) documented that increasing corporate social responsibility helps improve banks' image and increase the banks' performance in India."

The authors do not need to cite all studies connected to the present study unless they want a systematic literature review, so they must provide a detailed procedure for selecting articles! Therefore, cite less but elaborate more with a critical point of view!

Methodology 

Provide a model for hypotheses! Two hypotheses do not contribute enough to the available literature!

The model is presented adequately.

Results and discussion 

Well presented. Good job.

Conclusions 

Conclusions are not a summary of results! The authors should answer the research questions in conclusions, highlight the contributions of the research, and explain how results could fill the research gaps.

Any limitations to the study?

Author Response

Response to reviewer 3

Author Response File: Author Response.pdf

Reviewer 4 Report

Comments and Suggestions for Authors

The vast majority of research on the relationship between CSR/sustainability practices and profitability is carried out at the corporate level, without considering the contextual factor of the economy or country where companies operate. Some authors use control variables, such as the size of the companies or the sector of activity, but it is necessary to control for the country or economy variable where the studied companies operate. The problem becomes more complex because many investigations are carried out with samples of global companies, which operate in many countries and economies. Therefore, this work is an important contribution to this field of study. I congratulate the authors for addressing this topic.

Below, I share with the authors evaluation of their article. My observations are organized based on the structure of the document. In all items I highlight the strengths of the document and point out the weaknesses that I find.

Title – It is very general. It does not directly refer to the central content of the article. It is suggested to review it.

Abstract – Clearly establishes the problem that the paper addresses. Presents the main results and reflects on their impact. But it does not report on the methodology applied by the researchers. Furthermore, the author mentions GCC Countries or GCC Economies without explaining their meaning. This may be a problem for readers with little information about the Persian Gulf economies. It is suggested: 1) include a brief reference to the methodology used and 2) indicate the meaning of GCC Countries.

Keywords – the words included are correct. However, a reference to the “profitability of the banking sector” is missing, which is what is analyzed in the article. In addition, it is suggested to replace GCC with the meaning of these acronyms.

Introduction – The introduction includes a correct description of the problem and a good justification of the reasons for studying it. The presentation of results is synthetic and well explained. The analysis of the implications of the results is also interesting. But the methodology used by the authors is not clear. It is suggested to better describe the methodology.

Literature review

·        The authors use a wide and updated bibliography

·        Most of the bibliographical references correspond to the relationship between individual ESG performance of companies and financial performance. But this is explained by the fact of the lack of research for Sovereign ESG.

Hypothesis. They are well formulated

Methodology.

·        The model and methodology are well explained and substantiated

·        The definition and operationalization of each variable is well explained. Furthermore, the author bases the usefulness of each of the explanatory variables on other research.

·        Statistical techniques are described correctly and are well founded.

 

Results.

·        The statistical analysis is correct and exhaustive.

·        The presentation of the results in tables and graphs is easy to interpret

·        The analysis of the results is somewhat synthetic, but it is well done

Conclusions

·        The summary of the findings is concrete and includes the core of the results

·        Analysis of the practical implications of the results includes interesting suggestions for policy makers

·        The author proposes new research problems related to the topic addressed in the article

·         A brief reflection on the methodological limitations of the work is missing.

SUGGESTIONS

Based on the previous analysis, some suggestions are made with the aim of helping authors improve the quality of the article:

1)     Check the title

2)     Include in the summary a brief reference to the methodology used and indicate the meaning of the expression GCC Countries

3)     Include a keyword referring to the profitability of the banking sector and replace the acronym GCC with its meaning

4)     Include in the introduction a brief description of the methodology

5)      Include in the conclusions a brief reflection on the methodological limitations of the work.

 

Author Response

Response to reviewer 4

Author Response File: Author Response.pdf

Round 2

Reviewer 3 Report

Comments and Suggestions for Authors

Good job!