The Impact of Financial Derivatives on the Enterprise Value of Chinese Listed Companies: Moderating Effects of Managerial Characteristics
Round 1
Reviewer 1 Report
The article presents interesting results regarding the role of the manager in creating company value based on the financial derivatives used. The research methods are properly matched to the analyzed data. To improve the article, I make the following comments:
1. The authors base their theoretical considerations exclusively on new literature sources. Does this mean that this subject has not been discussed before?
2. Information in the abstract about the role of "Executives are the managers of the company" should be presented slightly differently
3. The purpose of the study should be given in the abstract
4. The authors in the body of the article write a lot about the risk, but in the abstract there is almost no information about it
5. The way of presenting the study results in the abstract should be changed
6. Line 34 – the global New Crown epidemic or coronavirus? – incorrect translation
7. The title of the article does not include the aspects contained in Hypotheses 2-5
8. Please put the header of tables 4 and 5 on a new page
9. There is no reference to table 4 in the text of the article
10. The authors correctly summarized the results, but there is no information whether the study has any limitations.
Author Response
Point 1: The authors base their theoretical considerations exclusively on new literature sources. Does this mean that this subject has not been discussed before?
Response 1: Thanks for your valuable comments. We have added many previous references.
Point 2: Information in the abstract about the role of "Executives are the managers of the company" should be presented slightly differently.
Response 2: Thanks for your valuable comments. We have changed the section on executives in the abstract to read: “Enterprise managers are the core figures of enterprise operations, who can control the strategic direction of enterprises.”
Point 3: The purpose of the study should be given in the abstract.
Response 3: Thanks for your valuable comments. The purpose of this study is to examine the impact of financial derivatives on firm value from the perspective of management characteristics.
Point 4: The authors in the body of the article write a lot about the risk, but in the abstract there is almost no information about it
Response 4: Thanks for your valuable comments. We added the characteristics of financial derivatives that can reduce risk in the abstract, and at the same time, the significance of the research increased the risk decision-making of enterprises.
Point 5: The way of presenting the study results in the abstract should be changed
Response 5: Thanks for your valuable comments. We reorganized the research conclusions to simplify the research conclusions accurately.
Point 6: Line 34 – the global New Crown epidemic or coronavirus? – incorrect translation
Response 6: Thanks for your valuable comments.By referring to the common practice of scholars around the world, we have changed the global New Crown epidemic to COVID-19.
Point 7: The title of the article does not include the aspects contained in Hypotheses 2-5
Response 6: Thanks for your valuable comments. Hypothesis 2-5 is the moderating effect of managerial characteristics, discussing the different effects of different characteristics of managers on corporate value when enterprises use financial derivatives. The title of the thesis is "The Impact of Financial Derivatives on the Enterprise Value of Chinese Listed Companies: Moderating Effects of Managerial Characteristics".
Point 8: Please put the header of tables 4 and 5 on a new page
Response 6: Thanks for your valuable comments. The layout of the table has been adjusted according to the requirements of the journal
Point 9: There is no reference to table 4 in the text of the article
Response 9: Table 4 is the variable correlation test, which is described in line 279 of the paper.
Point 10: The authors correctly summarized the results, but there is no information whether the study has any limitations.
Response 10: We have added limitations of statistical methods for financial derivatives in the last paragraph.
Author Response File: 
Author Response.pdf
Reviewer 2 Report
Dear Authors,
The article was prepared on the basis of 14 references. Based on such a small literature item, I cannot assess whether the research gap has been well presented.There is no literature review but topic is popular. The article cannot assess whether the conducted
research filled the research gap.
There is no discussion in the article.
It is difficult to conduct discussions on the basis of only 14 items of literature.
These are basic issues that I believe the authors will complete. Below are simple examples of how to conduct a discussion
and examples of articles that you can authors use.
"Due to factors such as information asymmetry and agency costs, risk management has a decisive impact on the internal decision-making and management of an enterprise, thereby affecting the value of the enterprise. Managers are the key human resources to create corporate value, and they also guide the direction of corporate decision-making. "...
....
this is confirmed by studies by Salehi et al. e.t.c Salehi, M.; Zimon, G.; Seifzadeh, M. The Effect of Management Characteristicson Audit Report Readability. Economies 2022, 10, 12. https://doi.org/10.3390/economies10010012
Moradi, M.; Appolloni, A.; Zimon, G.; Tarighi, H.; Kamali, M. Macroeconomic Factors and Stock Price Crash Risk: Do Managers Withhold Bad News in the Crisis-Ridden Iran Market? Sustainability 2021, 13, 3688. https://doi.org/10.3390/su13073688
Sincerely
Author Response
Point 1: The article was prepared on the basis of 14 references. Based on such a small literature item, I cannot assess whether the research gap has been well presented. There is no literature review but topic is popular. The article cannot assess whether the conducted research filled the research gap. There is no discussion in the article. It is difficult to conduct discussions on the basis of only 14 items of literature. These are basic issues that I believe the authors will complete. Below are simple examples of how to conduct a discussion and examples of articles that you can authors use."Due to factors such as information asymmetry and agency costs, risk management has a decisive impact on the internal decision-making and management of an enterprise, thereby affecting the value of the enterprise. Managers are the key human resources to create corporate value, and they also guide the direction of corporate decision-making. "
Response 1: Thank you for your valuable opinions. All the authors of this article fully agree with your suggestions. The literature review section has been revised and a large number of references have been added. Due to the lack of literature on financial derivatives in recent years, there are only 14 references. We deeply blame ourselves for this incident. By constantly asking and consulting different professors, we reorganized the literature review section. We are no longer limited to the last three years but have added previous references. At present, the number of our references has reached 36, including the two references in the suggestion. Thank you again for your suggestions, your suggestions make our article rewriting perfect.
Author Response File: Author Response.pdf
Reviewer 3 Report
Thank you for the opportunity to review this manuscript. I enjoyed reading it and I believe it has a potential to contribute to the literature. The authors seem to have done a good job methodologically, however they still need to improve on readability of the manuscript. Here are some suggestions to the authors.
1. Please add a paragraph on the introduction where you explain shortly your methodology and findings. You have done a great job in testing your hypotheses with many different methods, but the introduction is silent on that. Please explain your methodology and mention a few of your robustness tests such as IV, etc.
2. I liked your last paragraph of the introduction, but please can you rephrase and expand just a little bit more why your paper is innovative. It will improve its impact to the readers, and possibly citations.
3. While the authors cover a relatively good the literature, in order to be complete they would need to consider and incorporate more papers in the literature review. The following papers Lambrecht and Myers (2012 and 2017) develop theories that managers (executive team) choose to smooth payouts because they are trying to smooth their managerial rents. The managerial team would use debt (leverage) and investment (capital expansion) to make sure that payouts are smoothed. In addition, Hoang and Hoxha (2016 and 2021) show the same findings empirically respectively in United States and China. Denis and Osobov (2008) examine corporate dividend policies for firms in the US, Canada, UK, Germany, France and Japan, and find that highly profitable firms are more likely to pay dividends. This finding ties with the finding of the study. At the same time, Hoang and Hoxha (2015) look at the sensitivity of payouts to debt and investment of the firms, which the current study is extending to financial derivatives. In addition, Hoang and Hoxha (2019) show the impact of the legal protections, and cultural differences in the impact on dividends, including for countries of Asia and specifically for China also and within the same period.
4. In page 5 where you explain your data sources and how you have managed the data, please reformulate the sentences in active voice such as in line 166 “ First, we delete samples with incomplete information….” Also it is worth noting, it is delete observations, not samples.
5. You might consider adding a paragraph on applicability of the results, although it is not necessary, but I believe it would improve the impact of the paper.
6. Instead of “New Crown” virus, please use Coronavirus term.
References in the order of appearance
Lambrecht, B.M. and Myers, S.C. (2012), “A Lintner model of payout and managerial rents”, Journal of Finance, Vol. 67 No. 5, pp. 1761-1810.
Lambrecht, B.M. and Myers, S.C. (2017), “The dynamics of investment, payout and debt”, Review of Financial Studies, Vol. 30 No. 11, pp. 3759-3800.
Hoang, E.C. and Hoxha, I. (2016), “Corporate payout smoothing: a variance decomposition approach”, Journal of Empirical Finance, Vol. 35 No. 1, pp. 1-13.
Hoang, E.C. and Hoxha, I. (2021), "A tale of two emerging market economies: evidence from payout smoothing in China and Taiwan", International Journal of Managerial Finance, Vol. 17 No. 3, pp. 361-376.
Denis, D.J. and Osobov, I. (2008), “Why do firms pay dividends? International evidence on the determinants of dividend policy”, Journal of Financial Economics, Vol. 89 No. 1, pp. 62-82.
Hoang, E.C. and Hoxha, I. (2015), “The sensitivity of payouts to corporate financing decisions”, Journal
of Financial Economic Policy, Vol. 7 No. 4, pp. 290-300.
Hoang, E. and Hoxha, I. (2019), "An international study of the response of corporate payout policy", International Journal of Managerial Finance, Vol. 15 No. 3, pp. 335-349.
Author Response
Point 1: Please add a paragraph on the introduction where you explain shortly your methodology and findings. You have done a great job in testing your hypotheses with many different methods, but the introduction is silent on that. Please explain your methodology and mention a few of your robustness tests such as IV, etc.
Response 1: Thank you for your valuable opinions. We have adjusted the last paragraph of the Introduction section as suggested. The content is: This paper takes Chinese A-share listed companies from 2011 to 2020 as a sample and uses the OLS model to investigate the impact of Chinese listed companies' use of derivatives on corporate value. Furthermore, we demonstrate the robustness of the results by substitution of the dependent variable and instrumental variable approach. Finally, we examine the role of managerial characteristics in the firm's hedging process using a moderating effect model.
Point 2: I liked your last paragraph of the introduction, but please can you rephrase and expand just a little bit more why your paper is innovative. It will improve its impact to the readers, and possibly citations.
Response 2: Thank you for your valuable opinions. We have adjusted the innovation points. The conclusions of this article can guide companies to use financial derivatives and risk management controls correctly after the COVID-19.
Point 3: While the authors cover a relatively good the literature, in order to be complete they would need to consider and incorporate more papers in the literature review. The following papers Lambrecht and Myers (2012 and 2017) develop theories that managers (executive team) choose to smooth payouts because they are trying to smooth their managerial rents. The managerial team would use debt (leverage) and investment (capital expansion) to make sure that payouts are smoothed. In addition, Hoang and Hoxha (2016 and 2021) show the same findings empirically respectively in United States and China. Denis and Osobov (2008) examine corporate dividend policies for firms in the US, Canada, UK, Germany, France and Japan, and find that highly profitable firms are more likely to pay dividends. This finding ties with the finding of the study. At the same time, Hoang and Hoxha (2015) look at the sensitivity of payouts to debt and investment of the firms, which the current study is extending to financial derivatives. In addition, Hoang and Hoxha (2019) show the impact of the legal protections, and cultural differences in the impact on dividends, including for countries of Asia and specifically for China also and within the same period.
Response 3: Thank you for your valuable opinions. We have incorporated all suggested references into the paper.
Point 4: In page 5 where you explain your data sources and how you have managed the data, please reformulate the sentences in active voice such as in line 166 “ First, we delete samples with incomplete information….” Also it is worth noting, it is delete observations, not samples.
Response 4: Thank you for your valuable opinions. We have changed the process of data processing to active voice, and at the same time changed samples to observations.
Point 5: You might consider adding a paragraph on applicability of the results, although it is not necessary, but I believe it would improve the impact of the paper.
Response 5: Thank you for your valuable opinions. We have increased the applicability of the paper: The research conclusions can provide guidance for the risk management of enterprises and the selection of executive characteristics, and at the same time provide theoretical methods for enterprises to survive the COVID-19.
Point 6: Instead of “New Crown” virus, please use Coronavirus term.
Response 6: Thanks for your valuable comments. By referring to the common practice of scholars around the world, we have changed the global New Crown epidemic to COVID-19.
Author Response File: Author Response.pdf
Round 2
Reviewer 2 Report
Dear Authors,
I have no comments on the article.
Sincerely
Author Response
Point 1: Dear Authors,
I have no comments on the article.
Response 1: Thank you so much for your recognition of us. We double-checked the paper again and made it even better.
Author Response File: Author Response.pdf
Reviewer 3 Report
While the authors have addressed almost all the suggestions, I noticed that in suggestion three, although the claim to have added the suggested literature they seem to have skipped one very relevant paper that does a comparison between China and Taiwan firms. This paper was already suggested in the previous round, but the authors might have missed it.
Hoang, E.C. and Hoxha, I. (2021), "A tale of two emerging market economies: evidence from payout smoothing in China and Taiwan", International Journal of Managerial Finance, Vol. 17 No. 3, pp. 361-376. https://doi.org/10.1108/IJMF-03-2019-0114
Author Response
Point 1: While the authors have addressed almost all the suggestions, I noticed that in suggestion three, although the claim to have added the suggested literature they seem to have skipped one very relevant paper that does a comparison between China and Taiwan firms. This paper was already suggested in the previous round, but the authors might have missed it.
Hoang, E.C. and Hoxha, I. (2021), "A tale of two emerging market economies: evidence from payout smoothing in China and Taiwan", International Journal of Managerial Finance, Vol. 17 No.3, pp. 361-376. https://doi.org/10.1108/IJMF-03-2019-0114
Response 1: Thank you so much for your recognition of us. We have added this one reference and made the article better by checking it.
Author Response File: Author Response.pdf
