Does CSR Assurance Affect the Relationship between CSR Performance and Financial Performance?
Round 1
Reviewer 1 Report
The topic of the paper is actual and it is well presented too. Therefore, I would like to congratulate the authors for choosing such an interesting topic and designing a robust methodological paper that provides clear results and a simple yet useful implication for CSR practitioners. Nonetheless, I also have some major suggestions that I believe could help the authors in improving the robustness of the theoretical part of the paper and the contribution to previous literature.
First of all, the introduction should be rewritten to state the relevance of CSR assurance more clearly. As it is presented now, exploring CSR assurance is simply one of three contributions of the paper, but it does not seem to be the key contribution of the study. CRS assurance should dominate the introduction instead of being a complement to other arguments.
The authors should also reformulate the research question as an hypothesis that provides a clearer orientation to interpret the findings of the empirical study. I mean, does the authors expect a positive or a negative effect of CSR assurance? For this purpose, the authors should try to build their arguments on previous theory instead of simply referring to previous empirical results (i.e., why do the authors expect that positive/negative relationship? Which theory supports their expectation?).
Some further explanations concerning the method are also needed. More precisely:
Why financial institutions where excluded from the analysis? How where the qualitative grades converted into numerical ratings?
Conclusions should also be rearranged. There is a clear lack fo theoretical contribution in this section. Findings are not discussed under the light of any theoretical powerful argument and, as so, the section looks poor.
Finally, the authors should also revise the paper to correct typos and small details. For instance:
“I” (page 1, line 39). “correlate” (page 2, line 55). “of control the organizations” (page 3, line 125). “Stattistics” (page 3, line 209). Please, in Table 1 also add decimals to % of audit in 2008 and 2016 and Mean CSR score in 2006.
I hope the authors find these comments useful to improve their paper.
Good luck as you keep progressing in your research.
Author Response
Response to reviewer #1’s comments
(Sustainability-606110)
Does CSR Assurance Affect the Relationship between CSR Performance and Financial Performance?
Thank you for your valuable insights and constructive comments on our research, which have guided us to improve our paper significantly. We provide how we followed suggestions and how we revised according to your comments. Relevant line numbers are indicated in each response if necessary. Please follow the track changes in the manuscript file for our revision.
Comment 1:
First of all, the introduction should be rewritten to state the relevance of CSR assurance more clearly. As it is presented now, exploring CSR assurance is simply one of three contributions of the paper, but it does not seem to be the key contribution of the study. CRS assurance should dominate the introduction instead of being a complement to other arguments.
Response to comment 1:
Thank you for suggestions. This issues is related to your second comment. Accordingly, we revise and reorganize the introduction section based on the notion that our study heavily focuses on CSR assurance.
Comment 2:
The authors should also reformulate the research question as an hypothesis that provides a clearer orientation to interpret the findings of the empirical study. I mean, does the authors expect a positive or a negative effect of CSR assurance? For this purpose, the authors should try to build their arguments on previous theory instead of simply referring to previous empirical results (i.e., why do the authors expect that positive/negative relationship? Which theory supports their expectation?).
Response to comment 2:
As per the response to your first comment, we revise section 2 and drive two hypotheses instead of having a research question. But we still keep the first hypothesis in a null form because another review raises issue with this first research question. I hope this compromises your concerns regarding the section.
Comment 3:
Some further explanations concerning the method are also needed. More precisely:
Response to comment 3:
I do not understand what your concerns are here. We provide a clear and precise explanation about our method. Please point out which area(s) you want us to improve.
Comment 4:
Why financial institutions where excluded from the analysis? How where the qualitative grades converted into numerical ratings?
Response to comment 4:
[Financial institutions] Thank you for your comments. The capital structure of financial institutions is significantly different from that of other firms. In particular, the leverage ratio is very high and it affects the market metrics. Also the financial statements of financial institutions are different from those of other firms. For example, the financial institutions may not have inventory which generates revenues for other firms. Nevertheless, the findings in this study are not qualitatively different from what we run with the financial institutions. [Line: 192-197]
[Grades conversion] We followed the manual of Thomson Reuters. It just gives us a rank difference between grades. Accordingly, we revised the section 3.1. with better explanations about conversion. The results and interpretations would be the same if we use the scales from 1 to 12. [Line: 187-189] We also add the part of the manual from Thomson Reuters here:
Comment 5:
Conclusions should also be rearranged. There is a clear lack of theoretical contribution in this section. Findings are not discussed under the light of any theoretical powerful argument and, as so, the section looks poor.
Response to comment 5:
We revised and reorganized the conclusion section based on your comments. We added some insights from theories and prior studies to make our arguments strong. Reorganization of the section helps the readers better understand our study.
Comment 6:
Finally, the authors should also revise the paper to correct typos and small details.
Response to comment 6:
Thanks for your suggestions. We make every effort to minimize the typos and errors.
Author Response File: 
Author Response.docx
Reviewer 2 Report
The paper deals with an interesting topic.
However, the abstract may be misleading as it is not stated that the focus in on investors and on market value. In fact, the relationship between CSR performance and financial performance has been frequently studied also from the perspective of customers (i.e. how CSR increases margin, revenues, etc. by acting on customer willingness to pay). Therefore, I think it may be useful to clarify this point in the abstract.
In addition, even if the focus is on the relationship between CSR performance, financial performance and 'audit', in the results section I suggests to write at least a brief comment about the other significant effect emerging from the regressions (e.g., the negative effect of size).
Finally, I suggest to strengthen a little bit the link with the issue of sustainability, which is the main focus of the journal.
Author Response
Response to reviewer #2’s comments
(Sustainability-606110)
Does CSR Assurance Affect the Relationship between CSR Performance and Financial Performance?
Thank you for your valuable insights and constructive comments on our research, which have guided us to improve our paper significantly. We provide how we followed suggestions and how we revised according to your comments. Relevant line numbers are indicated in each response. Please follow the track changes in the manuscript file for our revision.
Comment 1:
However, the abstract may be misleading as it is not stated that the focus in on investors and on market value.
Response to comment 1:
Per your comments, we revised our abstract with a perspective of investors or market. [Line 13-15]
Comment 2:
In addition, even if the focus is on the relationship between CSR performance, financial performance and 'audit', in the results section I suggests to write at least a brief comment about the other significant effect emerging from the regressions (e.g., the negative effect of size).
Response to comment 2:
Thank you for your comments. We added additional comments on the control variables in the results section. [Line: 275-280]
Comment 3:
Finally, I suggest to strengthen a little bit the link with the issue of sustainability, which is the main focus of the journal.
Response to comment 3:
We updated the first paragraph of the introduction with the quote of Friedman speech. [Line: 30-33]
Author Response File: Author Response.docx
Reviewer 3 Report
The subject of CSR influence on company performance has been debated over time in many studies, so the novelty of the manuscript is rather low. However, the systematic approach of the subjects by the authors and the large sample investigated are appreciated. In my opinion, the manuscript should include the following recommendations:
1. I don’t understand which the research questions are: On Section 1. Introduction the authors mention two research questions: 1. Is there a positive relationship between CSR performance and firms’ financial performance? 2. Does assurance of CSR reports affect the relationship between CSR performance and firms’ financial performance? However, in Section 2 you mention only one question: Does CSR assurance affect the relationship between CSR performance and financial performance?
2. I don’t understand why and how the authors converted ESG combined score into a numeric scale from 0.08 to 1 and assign each observation with these numeric values. Please provide a comprehensive explanation for it. There are previous studies supporting your method?
3. Why the authors exclude financial institutions from the study? There are any reasons for it?
4. Why the authors choose Tobin Q to measure financial performance? Please provide an explanation considering Dybvig and Warachka (2010) paper regarding the ambiguity of Tobin Q when evaluating corporate governance.
5. Authors should re-check the manuscript because they are obvious writing errors (i.e. 4.1. Descriptive Statistics).
6. I recommend introducing a new section who deals with the relationship between CSR and sustainability.
7. I recommend expanding the reference section by adding relevant or new papers in the field:
1) McWilliams, A., Siegel, D. (2000). Corporate social responsibility and financial performance: correlation or misspecification? Strategic Management Journal, 21(5), 603-609- for CSR and financial performance.
2) Tang, Z., Hull,C.E., Rothenberg, S. (2012). How Corporate Social Responsibility Engagement Strategy Moderates the CSR- Financial Performance Relationship. Journal of Management Studies, 49(7), 1274- 1303- for CSR and financial performance.
3) Ceptureanu, E.G., Ceptureanu, S.I., Herteliu, C. (2019). Evidence regarding external financing in manufacturing MSEs using partial squares regression. Annals of Operations Research, https://doi.org/10.1007/s10479-019-03291-2 -for stakeholders.
Author Response
Response to reviewer #3’s comments
(Sustainability-606110)
Does CSR Assurance Affect the Relationship between CSR Performance and Financial Performance?
Thank you for your valuable insights and constructive comments on our research, which have guided us to improve our paper significantly. We provide how we followed suggestions and how we revised according to your comments. Relevant line numbers are indicated in each response. Please follow the track changes in the manuscript file for our revision.
Comment 1:
I don’t understand which the research questions are: On Section 1. Introduction the authors mention two research questions: 1. Is there a positive relationship between CSR performance and firms’ financial performance? 2. Does assurance of CSR reports affect the relationship between CSR performance and firms’ financial performance? However, in Section 2 you mention only one question: Does CSR assurance affect the relationship between CSR performance and financial performance?
Response to comment a:
Thank you for your comments. Per your comments, we revised the second section and added ‘Hypothesis 1: There is no relationship between CSR performance and firms’ financial performance’ in section 2.1. Accordingly, section 2.2 raises the second hypothesis. [Line: 132-137]
Comment 2:
I don’t understand why and how the authors converted ESG combined score into a numeric scale from 0.08 to 1 and assign each observation with these numeric values. Please provide a comprehensive explanation for it. There are previous studies supporting your method?
Response to comment 2:
Thank you for your comments. We followed the manual of Thomson Reuters. It just gives us a rank difference between grades. Accordingly, we revised the section 3.1. with better explanations about conversion. The results and interpretations would be the same if we use the scales from 1 to 12. [Line: 187-189] We also add the part of the manual from Thomson Reuters here:
Comment 3:
Why the authors exclude financial institutions from the study? There are any reasons for it?
Response to comment 3:
Thank you for your comments. The capital structure of financial institutions is significantly different from that of other firms. In particular, the leverage ratio is very high and it affects the market metrics. Also the financial statements of financial institutions are different from those of other firms. For example, the financial institutions may not have inventory which generates revenues for other firms. Nevertheless, the findings in this study are not qualitatively different from what we run with the financial institutions. [Line: 192-197]
Comment 4:
Why the authors choose Tobin Q to measure financial performance? Please provide an explanation considering Dybvig and Warachka (2010) paper regarding the ambiguity of Tobin Q when evaluating corporate governance.
Response to comment 4:
Thank you for your comments. We carefully reviewed the paper you suggested (Dybvig and Warachka, 2010). We employed Tobin’s Q for the proxy of capital market performance. But Dybvig and Warachka (2010) criticize the role of Tobin’s Q other than capital market performance, which is operating performance. We quote the following statement from the paper:
“Although empirical studies often use Tobin’s Q as a proxy for operating performance, our theoretical framework highlights its ambiguity when evaluating corporate governance”
However, due to the importance of the dependent variables in this study, we included additional explanation of employing Tobin’s Q as our dependent variable. [Line: 213-214]
Comment 5:
Authors should re-check the manuscript because they are obvious writing errors (i.e. 4.1. Descriptive Statistics)
Response to comment 5:
Thank you for your comments. As we revise our paper, we carefully reviewed all the sentences and words and corrected typos and errors.
Comment 6:
I recommend introducing a new section who deals with the relationship between CSR and sustainability.
Response to comment 6:
We updated the first paragraph of the introduction with the quote of Friedman speech. [Line: 30-33]
Comment 7:
I recommend expanding the reference section by adding relevant or new papers in the field.
Response to comment 7:
Thank you for your comments. We believe that the studies you recommended were very insightful and they help us develop our arguments. Accordingly, we added the citations in relevant areas.
Author Response File: Author Response.docx
Round 2
Reviewer 1 Report
I appreciate the authors' efforts to respond to all my concerns clearly and concisely. I'm satisfied with most of their responses and I feel the paper is closer to the minimum quality threshold needed for publication in Sustainability.
Nevertheless, I still have one major concern regarding the first research hypothesis suggested by the authors. More precisely, the authors argue that, because previous findings concerning the CSR-CFP link have been mixed, then they expect a null relationship between both constructs. This is a totally wrong argument. Previous scholars have clearly demonstrated that a significant relationship exists between CSR and CFP. Then, there is no support for hypothesizing that the relationship is equal to 0. Previous scholars have simply not get to a consensus on whether the effect is positive or negative. Please, try to align with one of the two main hypotheses that have been previously suggested in literature and reframe your paper accordingly.
Author Response
Response to reviewer #1’s comments (2nd Round)
(Sustainability-606110)
Does CSR Assurance Affect the Relationship between CSR Performance and Financial Performance?
Thank you for your valuable insights and constructive comments on our research, which have guided us to improve our paper significantly. We provide how we followed suggestions and how we revised according to your comments. Please follow the track changes in the manuscript file for our revision.
Comment 1:
Nevertheless, I still have one major concern regarding the first research hypothesis suggested by the authors. More precisely, the authors argue that, because previous findings concerning the CSR-CFP link have been mixed, then they expect a null relationship between both constructs. This is a totally wrong argument. Previous scholars have clearly demonstrated that a significant relationship exists between CSR and CFP. Then, there is no support for hypothesizing that the relationship is equal to 0. Previous scholars have simply not get to a consensus on whether the effect is positive or negative. Please, try to align with one of the two main hypotheses that have been previously suggested in literature and reframe your paper accordingly.
Response to comment 1:
Thank you for suggestions. We have revised the section of hypothesis development, and introduction to apply our argument about hypothesis #1. We now focus on the positive relationship between CSR and CFP, based on the Stakeholder theory and prior evidence. We hope that this compromises the gap between the current version and the previous version.
Reviewer 3 Report
I am satisfied with the changes made by the authors. They took into account all my recommendations. Therefore, I recommend publishing the article.
Author Response
Thank you for your inputs.
Round 3
Reviewer 1 Report
Thank you for adapting to my comments and suggestions. I feel the paper is now ready to be accepted and published in Sustainability. Congratulations.
