The Impact of Value Creation (Tobin’s Q), Total Shareholder Return (TSR), and Survival (Altman’s Z) on Credit Ratings

Round 1

Reviewer 1 Report

Comments and Suggestions for Authors

This article investigates the impact of financial indicators on company’s credit ratings. The findings suggest that neither Tobin's Q (TQ) and Total Shareholder Return (TSR) lack significant correlations with credit ratings, implying that stock market performance and total shareholder return do not directly impact credit ratings.

The biggest concern is the data source. The dataset comprises 2398 observations from 240 public companies active in the 175 United States market. Why not use all the US listed companies? On that basis did the authors choose these particular 240 companies? Without clear explanation, it makes the research highly suspicious.

There are some minor comments:

(1) The manuscript is a bit long considering the aim of the work is to identify influencing factors instead of casual relationships. Table 1, for example, is unnecessary because it is basically common knowledge for the readers of this journal. A shorter manuscript encourages readers to read along.

(2) The authors should go through formats carefully. For example, in Table 2 the dependent variables are all credit rating, but some are capitalized but some are not. The same mistake appears multiple times.

(3) The significance is usually denoted by stars (*) instead of letters shown in Table 6.

(4) Stata is a data processing tool, instead of “source”.

            The authors could improve the quality of the manuscript by incorporating richer set of data and addressing the minor comments above.

Comments on the Quality of English Language

This article investigates the impact of financial indicators on company’s credit ratings. The findings suggest that neither Tobin's Q (TQ) and Total Shareholder Return (TSR) lack significant correlations with credit ratings, implying that stock market performance and total shareholder return do not directly impact credit ratings.

The biggest concern is the data source. The dataset comprises 2398 observations from 240 public companies active in the 175 United States market. Why not use all the US listed companies? On that basis did the authors choose these particular 240 companies? Without clear explanation, it makes the research highly suspicious.

There are some minor comments:

(1) The manuscript is a bit long considering the aim of the work is to identify influencing factors instead of casual relationships. Table 1, for example, is unnecessary because it is basically common knowledge for the readers of this journal. A shorter manuscript encourages readers to read along.

(2) The authors should go through formats carefully. For example, in Table 2 the dependent variables are all credit rating, but some are capitalized but some are not. The same mistake appears multiple times.

(3) The significance is usually denoted by stars (*) instead of letters shown in Table 6.

(4) Stata is a data processing tool, instead of “source”.

            The authors could improve the quality of the manuscript by incorporating richer set of data and addressing the minor comments above.

Author Response

Follow attached the response to the reviewer

Author Response File: Author Response.pdf

Reviewer 2 Report

Comments and Suggestions for Authors

The authors should better justify their choice of financial indicators. Specifically, why did they only use Tobin's Q, total shareholder return, and Altman Z-score? Other financial indicators are certainly available, for example, the Ohlson O-score for predicting bankruptcy. 

Comments on the Quality of English Language

This article does not read well, and certain parts of the paper appear to be disorganized. Significant rewriting of the article is needed. Some specific editing comments follow.

In Abstract, "neither ... and " should be "neither ... nor".

In subsection 2.3, on page 5, in "This model served as a pattern for ...", a better word than "pattern" should be used.

On page 7, in Table 4, "Bool" is a typo.

In References, on page 15, the paper of "Gupta, R. (2023" appears twice. 

 

Author Response

Find attached the response to the reviewer.

Author Response File: Author Response.pdf

Reviewer 3 Report

Comments and Suggestions for Authors

The study investigates how financial indicators affect the credit ratings of S&P 500 corporations, taking endogeneity concerns into account with the Sys-GMM Model. Three independent variables representing market and survival determinants were examined in the study in addition to seven control variables drawn from the market, survival, profitability, leverage, liquidity, and macroeconomic domains.

The manuscript under evaluation shows conciseness, relevance to the field, and a well-structured presentation. The data exhibit a high level of interpretability and comprehensibility, with the authors demonstrating suitable and consistent interpretations. The methodology and presentation of results are clear and provide sufficient detail for other researchers to replicate the study and validate the findings.

However, I have some specific comments about:

·      Introduction and Literature Review and Hypothesis

o   I think that these phrases should be replaced with another ones:

”The provided text discusses the intricate nature of credit risk assessment in finance, emphasizing its importance for decision-making in the global financial market.”

”The text explores the research problem of assessing the ability of financial indicators to forecast credit ratings, aiming to mitigate financial losses for investors.”

It doesn't sound good at all as the first sentence of an article introduction and literature review.

·      I believe that the citation style should be improved. You cannot use in an article only formulations such as: the author defines, highlights, notes, etc. It doesn't sound academic at all.

·      Section 3 should be renamed ”Methodology” and Section 4 ”Results and discussion”

·      Table 2 – write Credit Rating – first line

·      Page 5 – citation error (”Ganti suggests”, ”Angeline Ng and M. Ariff”)

·      Page 5 – Also, companies with….

·      Page 8 – Source Table 5 ???

·      Page 9 – Title Table 7 ???

·      Page 9 – Source Table 8 ???

·      Page 10 – Table 9 should be in english

·      Page 13 – Source Table 11

About the quantitative analysis, which contains the hypothesis has a comprehensive and detailed explanation, although complex, it provides clear and concise information, ensuring a better understanding of the analysis process. This allows researchers and readers to replicate and validate the findings.

Additionally, it is important to note that the methodology used in this study was comprehensive and rigorous. The results obtained were consistent and supported the authors' conclusions. Overall, with the suggested improvement in this manuscript has the potential to reach a wider audience and contribute significantly to the existing body of knowledge in the field. 

And also has the potential to make a significant contribution to the field and attract attention from both researchers and practitioners. The findings not only add to the existing body of knowledge but also have practical implications for real-world applications.

Author Response

Find attached the response to the reviewer.

Author Response File: Author Response.pdf

Round 2

Reviewer 2 Report

Comments and Suggestions for Authors

The revised version is fine.

Reviewer 3 Report

Comments and Suggestions for Authors

I would like to express my appreciation for the substantial enhancements you made to the manuscript throughout the revision process.

Your article was accepted because of the meticulousness and focus on detail you showed in responding to the reviewers' feedback. Your diligence and commitment to implementing the advice and criticisms have surely improved the manuscript's overall quality.