Board Financial Expertise and Financial Sustainability: Evidence from Saudi-Listed Firms

Round 1

Reviewer 1 Report

Comments and Suggestions for Authors

the article deals with the topic of financial sustainability in relation to the qualification of the boards; the topic is relevant in current literature and the reasons for the research are clearly explained. Econometric model is suitable. The cited literature may have some improvements; practical implications and transfer to business may have some improvements. Overall the article is well structured, some minor revisions are suggested to the authors:

1. consider specific literature on financial sustainability and financially constrained companies;

2. broaden the managerial implications of the research findings and the implications for policy makers;

3. the models have a low R2 and you are asked to explain the reasons and whether this limits the models' ability to explain.

Author Response

Reviewer 1: Comments and Responses

1. Broaden the managerial implications of the research findings and the policy implications.

 Response:  The policy implications of the research findings have now been broadened in the abstract and conclusion. Please see the abstract and the concluding remarks.

2. The models have low R². Please explain the reasons.

Response: The R-Square of the models seems to be ok since their Prob. F-statistics / Chi2 are significant @ 1%. The evidence implies that the models are robust.

 

Reviewer 2 Report

Comments and Suggestions for Authors

This study shows that more financial expertise, measured in terms of education an experience, in board rooms leads to more financial sustainability in a sample of (just) Saudi listed firms.  A straightforward OLS technique is used, making endogeneity a probable issue that should be accounted for. Inclusion of interaction effects might have sharpened the picture that is being sketched. The generalisability of the (interesting) findings is an issue, as already noted by the authors.

 

The article is of an explorative nature and is in line with typical standards that can be set in such cases (single country study but with quite some data yet limited econometrics, etcetera). Anyway, the authors may want to indicate though, how variables are exactly measured and how endogeneity is allowed for by e.g. lagging variables ( if at all) and whether and how interactions between major variables have been explored (if at all) - all that has not been given much attention to may be included as recommendations for future researchers.

Author Response

Reviewer 2: Comment and Response

Comment: The authors have not given much attention to lag models and the interaction effect of the subject matter. These issues need to be captured as a recommendation for future researchers.

Response: To address this concern, the study applied a stage least square approach as a robustness check, which can handle endogeneity issues, if any, in our research. However, such recommendation is now stated in the conclusion as:

“ Future studies may introduce an intervening variable in modelling the nexus between board financial expertise and financial sustainability to unveil additional insights regarding this relationship. A dynamic model can also be applied to confirm the findings of this study.”