Effect of SME’s Managerial Ability and Executive Compensation on Firm Value
Round 1
Reviewer 1 Report
Reviewed paper is very interesant. The topic is fully in line with the focus of the journal. In formal terms, it can be stated that the authors proceeded under the general principles of scientific writing, and as well as in accordance with the journal template. The hypothesis are recommended to add to the methodology part from my point of view. In theoretical part I recommend to add some notes about push and pull managerial factors (you can use for example this source: Godany et al. 2021. Entrepreneurship Motivation in the 21st Century in Terms of Pull and Push Factors. TEM JOURNAL-Technology Education Management Informatics, 10 (1), 334-342. https://doi.org/10.18421/TEM101-42
Standard parts of scientific paper are observed. English Language need minor revisions. Processed 60 literary sources are corresponding with the focus of the topic and reflex the current situation. The authors used scientific sources from Web of Science database, too. The methodology is correctly used. Obtained results are evaluated and discussed. I recommend this manuscript after minor revisions for publishing in the journal.
Author Response
Thank you for your valuable comments and helpful suggestions that allowed us to improve our manuscript. We have considered all your suggestions and addressed all your concerns.
Reviewed paper is very interesant. The topic is fully in line with the focus of the journal. In formal terms, it can be stated that the authors proceeded under the general principles of scientific writing, and as well as in accordance with the journal template.
Response: Thank you very much for your positive feedback. We have highlighted below each of your comments in bold, then illustrated our response accordingly.
[Point 1] The hypothesis are recommended to add to the methodology part from my point of view. In theoretical part I recommend to add some notes about push and pull managerial factors (you can use for example this source: Godany et al. 2021. Entrepreneurship Motivation in the 21st Century in Terms of Pull and Push Factors. TEM JOURNAL-Technology Education Management Informatics, 10 (1), 334-342. https://doi.org/10.18421/TEM101-42
(Response 1): Thank you very much for your useful recommendations. We have carefully revised the hypothesis formulation section, considering your recommendations. As your suggestion, we have added a theoretical explanation of executive compensation based on the pull factors and push factors that are the entrepreneur's start-up motives.
[Point 2] Standard parts of scientific paper are observed. English Language need minor revisions. Processed 60 literary sources are corresponding with the focus of the topic and reflex the current situation. The authors used scientific sources from Web of Science database, too. The methodology is correctly used. Obtained results are evaluated and discussed. I recommend this manuscript after minor revisions for publishing in the journal.
(Response 2): Thank you for your valuable comments and helpful suggestions. In addition, we presented the sources of data for analysis in 3. Research design and sample selection and at the end of the study.
Reviewer 2 Report
General comment:
The paper provides an interesting analysis of the impacts of the managerial ability and level of compensation on firm value in small and medium-sized firms. Although it is recognized some merit to the research developed so far, there are major flaws that need to be overcome in a future revision of the manuscript.
Specific comments:
In order to increase the global quality of the manuscript, several suggestions and recommendations are made available below:
- The manuscript needs a professional editorial revision.
- The formatting guidelines of the Sustainability journal need to be respected in a new revised version of the manuscript.
- The research hypotheses need to be revised. For example H1: Executive compensation levels are positively related to firm value.
- In table 3, it is suggested to include the values of the variance inflation factor (VIF).
- The econometric techniques in use do not allow assessing the impacts associated with different explanatory variables. In my view, there is a need for revising this terminology, using instead the effects associated with distinct explanatory variables.
- The literature review and the discussion of results need to incorporate recent studies published in your target journal.
- A final section on Conclusions, limitations, and implications; needs to be inserted in the manuscript.
Author Response
Thank you for your valuable comments and helpful suggestions that allowed us to improve our manuscript. We have considered all your suggestions and addressed all your concerns.
The paper provides an interesting analysis of the impacts of the managerial ability and level of compensation on firm value in small and medium-sized firms. Although it is recognized some merit to the research developed so far, there are major flaws that need to be overcome in a future revision of the manuscript
Response: Thank you very much for your positive feedback. We have highlighted below each of your comments in bold, then illustrated our response accordingly.
[Point 1] The manuscript needs a professional editorial revision.
(Response 1): Thank you very much for your useful recommendations. It was revised according to the reviewer's opinion.
[Point 2] The formatting guidelines of the Sustainability journal need to be respected in a new revised version of the manuscript.
(Response 2): We do apologize for the errors of the format and appreciate your remark to correct it. Accordingly, we carefully corrected the format as you suggested.
[Point 3] The research hypotheses need to be revised. For example H1: Executive compensation levels are positively related to firm value.
(Response 3): Thank you very much for your useful recommendations. We have carefully revised the hypothesis formulation section, considering your recommendations.
[Point 4]: In table 3, it is suggested to include the values of the variance inflation factor (VIF).
(Response 4): Thank you for your valuable comments and helpful suggestions. we recognized the importance of the VIF value of the regression analysis rather than the meaning of the correlation coefficient presented in Table 3. Therefore, the results of our regression analysis suggested the maximum value of VIF.
[point 5] The econometric techniques in use do not allow assessing the impacts associated with different explanatory variables. In my view, there is a need for revising this terminology, using instead the effects associated with distinct explanatory variables.
(Response 5): Thank you very much for your useful recommendations. According to econometric techniques, explanatory variables must each be in an exclusive relationship. To confirm this relationship, table 4. presenting all regression analysis results showed the maximum value of VIF values, showing that there was no problem with the model.
[Point 6]: The literature review and the discussion of results need to incorporate recent studies published in your target journal.
(Response 6): Thank you very much for your useful recommendations. we presented recent studies published in our target journal in the literature review and conclusions. (p. 4, 5, 15)
[Point 7] A final section on Conclusions, limitations, and implications; needs to be inserted in the manuscript.
(Response 7): Thank you very much for your useful recommendations. We added limitations and implications to the conclusion. (p. 15)
The limitations of this study are as follows. First, we analyzed managerial compensation only for cash compensation. However, some studies have suggested that the relationship between manager compensation and corporate value may be high in a stock-linked system. Therefore, as suggested in previous studies in this field, the scope of compensation for managers is proposed. Second, we used the research method of Demerjian [8,9] to measure managerial ability. This method is measured based on the company's efficiency and cannot be performed by other managers. Third, this study did not take into account the variables that managerial ability and compensation could affect firm value. For example, corporate governance structure[48] and corporate social responsibility activities[35] can be an important factor in which managerial ability or compensation has a differentiating effect on firm value Therefore, in the future, in order to study the relationship between executive compensation and firm value, the problem of stock compensation measurement should be considered. And we used the research method of Demerjian et al. [8,9] for managerial abilities. Demerjian et al. [8,9] based managerial abilities on efficiency. However, managerial skills need to be considered in many ways. Future research suggests that it is necessary to develop various measurements of managerial ability.
Nevertheless, we can analyze the moderating effect of managerial ability for the inconsistent cause of executive compensation and firm value. In addition, there is a lack of research that has been limited to small and medium-sized enterprises (SMEs) in previous studies in this field. This study suggests that the importance of managerial ability among the managerial characteristics of SMEs is an essential factor that can affect the value, sustainability, and growth.
Round 2
Reviewer 2 Report
Congratulations on the revised version of the manuscript.
