Driving Venture Capital Interest: The Influence of the Big 4 Audit Firms on IPOs

Round 1

Reviewer 1 Report

Comments and Suggestions for Authors

My main concern with the paper is respect of endogeneity.  The authors mention that the deal with endogeneity on page 16 in Table 12.  There is no Table 12.  I see some models in Table 5, but the control (instrument) seems to be prestigious underwriter.  It does not make sense, as that is an endogenous variable as well.

The dependent variable is VC participation... but VCs come many years before the auditors are picked... so I would think causality goes the other way around?  Maybe you want to change the dependent and independent variables?

And perhaps you want to consider some other VC charactersitics, such as whether or not there was a style-drift (which might increase the need for a big auditor)?  See eg http://dx.doi.org/10.1561/114.00000023

Comments on the Quality of English Language

The English was okay - just minor checks needed

Author Response

I am grateful to referees for their useful comments. I have fully revised the paper thoroughly in response to the issues raised in the referee’s reports.

Author Response File: Author Response.doc

Reviewer 2 Report

Comments and Suggestions for Authors

Comments:

  - The paper is very well supported on the literature and the methodology is robust;

  - it would have been important to justify the choice of the interval between 1995 and 2019, i.e. why was this interval chosen and not another?

  - it is also important to adequately highlight the paper's contribution to the literature and motivation: I suggest that these topics be highlighted in separate points, so that the relevance of the paper can be perceived more clearly by the reader;

  - the conclusions are well presented and include a discussion of the results - I suggest separating the two sections, presenting the discussion of the results separately from the conclusions;

  - in addition, the study has no limitations and the inclusion of this topic demonstrates a capacity for self-reflection on the work carried out, which is the basis for making suggestions for future work;

  - another issue is the size of the document presented: the authors present many annexes and the bibliography is too long - half the paper is for the bibliography list and this is clearly exaggerated! I suggest that the authors be more concise and be able to support their work in a shorter list, without losing relevance – in short, the paper has too many references – please, do it shorter.

Comments on the Quality of English Language

The quality of the English language is, in my opinion, very competent and at the level required for publication.

Author Response

I am grateful to referees for their useful comments. I have fully revised the paper thoroughly in response to the issues raised in the referee’s reports.

Author Response File: Author Response.doc

Reviewer 3 Report

Comments and Suggestions for Authors

Need to improve in the following ways:

1. Rewrite the paper without repetition. 

2. VCs are not naive because the Auditor is involved in the big four. They will be more interested in the potential success of the IPO since their capital will be at stake.

3. If taking one of the four auditors is A REQUIREMENT, then the results do not make much sense.

4. To validate your findings, repeat the same for SIMILAR IPOs that do not involve the big four auditors.

5. The paper is good but too long for any journal. I suspect the authors must have scooped the paper from his thesis. Summarize the paper within 15-20 pages (all inclusive). 

6. Too many citations of references, why don't you take the two latest publications? 

Comments on the Quality of English Language

OK, acceptable.

Author Response

I am grateful to referees for their useful comments. I have fully revised the paper thoroughly in response to the issues raised in the referee’s reports.

Author Response File: Author Response.doc

Reviewer 4 Report

Comments and Suggestions for Authors

Thank you for the opportunity to review the paper Driving Venture Capital Interest: The Influence of the Big 4 Audit Firms on IPOs.  The topic of the paper is interesting, and I appreciate the Author’s effort to prepare the study. However, in my opinion, the paper needs major revisions.

The paper is too long and includes more than 200 references, which makes it difficult to follow the core research problem. To clarify the paper, I recommend shortening its length and reducing the number of references.

Researchers usually document that IPO is an exit route for VCs (i.e. VCs usually sell their shares through IPOs), while the paper is devoted to venture capitalists investing in IPO companies, which is not common. Thus, I recommend emphasizing this problem in the text, and more clearly explaining why VCs decide to invest in IPO companies.

In my opinion definition of private equity capital and venture capital might be included in the introduction section.

Research method

The Author applied the Pearson correlation coefficient for variables (Table 2). However, Pearson correlation is not suitable for categorical variables. I recommend employing other methods of measuring the relationship between the variables.

There are many independent variables (too much?) applied in the study, but the Author does not explain why these variables were employed.

Conclusion section

What are the limitations of the study?

Literature

This section includes more than 200 references.  I am not sure if all these references are relevant to this study.  The references list needs revision (e.g. 120-121; 122-123; 126-127) 

Author Response

I am grateful to referees for their useful comments. I have fully revised the paper thoroughly in response to the issues raised in the referee’s reports.

Author Response File: Author Response.doc

Round 2

Reviewer 1 Report

Comments and Suggestions for Authors

Congratulations on an interesting paper.

Author Response

Congratulations on an interesting paper.

 

I express my gratitude to the esteemed reviewer for offering constructive feedback that significantly enhanced the quality of the work.

Reviewer 4 Report

Comments and Suggestions for Authors

I found that the author has made a lot of effort to work on the review comments. I have only one minor recommendation. The author uses “I” (e.i. pages 8, 9), which suggests that the paper is written by one person. However, I can also find the pronouns “we” or  “our”, which suggest more than one author. I recommend using homogeneous pronouns

Author Response

I found that the author has made a lot of effort to work on the review comments. I have only one minor recommendation. The author uses “I” (e.i. pages 8, 9), which suggests that the paper is written by one person. However, I can also find the pronouns “we” or  “our”, which suggest more than one author. I recommend using homogeneous pronouns

 

Thank you for these insightful remarks. I have ensured the consistent use of homogenous pronouns throughout the work.

Author Response File: Author Response.doc