The Influence of Cash Ownership on Financial Performance: An Examination of Disruptors and Acquirers

Round 1

Reviewer 1 Report

The article may be of interest to researchers. Its main goal was to investigate the influence of cash-funded disruptors, and cash-funded acquirers on firm performance (on stock returns, return on assets, and return on equity). The study included 832 disruptor 832 disruptor firms, and 924 acquirers, from 2000-2020. The article consists of an introduction, 4 main parts and conclusions. A gap in knowledge was identified.

The hypotheses presented were supported by a literature review.

Manuscript is clear and presented in well structured manner. The research and conclusions were carried out correctly. At the same time, the question arises how these considerations relate to other theories of capital structure. Within the framework of the theory of information asymmetry, a distinction is made not only between pecking order theory , but also signaling theory. In order to show the fullness of the considered problem, it seems reasonable to refer in the paper to signaling theory.

The work should explain why short-term debt was adopted as the proxy for agency costs (page 13).

The cited reference is not mainly include recent publications (less than 5 years). There are only 4 publications from the last 5 years. It would be recommended to supplement the literature with more recent literature. At the same time, a reference to the work of Jensen M.C., Meckling W.H., (1976) should be taken into account (singaling theory).

The tables were prepared correctly. They are quite easy to understand. Conclusions are consistent with the evidence and arguments presented.

Author Response

See changes in yellow, in the document. The table shows the 3 changes made upon reviewer request.

Author Response File: Author Response.docx

Reviewer 2 Report

Thank you for giving me an opportunity to review the paper, “The Influence Of Cash Ownership On Financial Performance: An Examination Of Disruptors And Acquirers“ for the JRFM.

 

The manuscript addresses an interesting question that studies how cash funded disruptors and acquirers effect stock returns and firm financial performance. Authors use data from 2000-2020 and find positive relation between cash funded disruptors and cash funded acquisitions and financial performance.

 

The paper is exploring an interesting question, but in current state the study and methodology are at a preliminary stage. I list my main concerns and suggestions below.

1)    Abstract: Abstract can be improved where authors clearly differentiate between the contribution of their study and the existing knowledge and focus more on the former. Abstract should provide a short summary that gives the reader a good idea of main contribution of the paper.

2)    Introduction: Introduction should be improved by giving clear idea about what is meant by cash funded acquisitions and disruptions. It will be a good idea to add a real world example to the introduction that motivates the study and helps the reader to understand the practicality of the theoretical results that are to follow.

3)    Hypothesis needs to be differentiated. Cash holdings and cash flow hypothesis are interrelated. Higher cash flows will over time lead to higher cash holdings.

Hypothesis should provide a sharp test for the question at hand. For example hypothesis 1d states: “For disruptor firms, a size effect may be observed, with large and small disruptors displaying differences in the effect of cash holdings, cash flow, and cash from debt proceeds, on performance.”

4)    Explain why different specifications of regression models were used. Why certain were included. Link the choices with existing literature.

5)    Results need to be presented in such a manner that each table can stand alone and the reader does not need to go back to the text to understand the table. Add a summary table summarizing the main results and the hypothesis.

6)    Tables should be remade following standard formatting recommendations in the finance literature.

7)    I will recommend adding a discussion section before the conclusion. In discussion of results explain the economic justification of results. Explain the results in light of similar papers on cash holdings. Discussion needs to be a coherent and cohesive set of arguments that take the reader beyond this study and establish the findings in the existing literature. Contextualize the findings in the literature and explain the added value of your study towards that literature.

8)    Careful English editing is required. At places the manuscript is hard to read and construction of sentences awkward.

Wishing you luck!

 

Author Response

See changes made in green in the document. The attached table is a point-by-point listing of changes made in green for Reviewer 2.

Author Response File: Author Response.docx

Round 2

Reviewer 2 Report

Dear Authors,

The manuscript seems much stronger after the changes. Wishing you luck for the next stage! 

Author Response

Thank you to the reviewer, for making valuable suggestions. I have made final formatting changes to the manuscript to comply with the journal's requirements.

Author Response File: Author Response.docx