Person: Goergen, Marc
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Marc
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Goergen
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IE University
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IE Business School
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Finance
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Publication Do multiple credit ratings reduce money left on the table? Evidence from U.S. IPOs(Elsevier, 2021-04) Goergen, Marc; Gounopoulos, Dimitrios; Koutroumpis, Panagiotis; https://ror.org/02jjdwm75Using credit ratings as an uncertainty-reducing mechanism, we provide evidence of the beneficial impact of multiple credit ratings on reducing IPO underpricing and filing price revision. We find that the acquisition of multiple ratings in the pre-IPO period mitigates uncertainty more than the acquisition of a single rating. Multi-rated firms also have higher probabilities of survival than those with a single rating, whereas credit rating levels matter only for IPOs with more than one rating. The IPOs that are awarded the first rating on the borderline between investment and non-investment grades are more likely to seek an additional rating.Publication Governance Through Ownership and Sustainable Corporate Governance(Oxford Research Encyclopedias, 2022-03-23) Goergen, Marc; https://ror.org/02jjdwm75Sustainable corporate governance has been defined as corporate governance that ensures corporations are run in such a way that they are sustainable over the long term. Note that for corporations to be sustainable in the long run, they need to ensure the preservation, as well as possibly the enhancement, of their ecosystem. This not only includes establishing and maintaining good relations with their shareholders and stakeholders but also preserving their environment. Here, the term environment should be understood as taking on a broader meaning. Indeed, corporations preserving their environment should not be reduced to mere environmentalism but they should also operate in harmony with the broader economic and social system. Put differently, sustainable corporate governance should also ensure that corporations are run in such a way to avoid future crises, such as the Great Recession. This would require a move away from business models that focus on short-term shareholder value while endangering the survival of the corporation over the long term. Whereas much of the existing literature suggests that corporations should merely maximize shareholder value and that a stakeholder approach will result in vague and often contradictory objectives for the management, long-term shareholder value creation is nevertheless compatible with the corporation looking after the interests of its immediate, as well as possibly more remote, stakeholders. Ultimately, sustainable business practices will not only benefit the corporation’s employees, customers, and the broader society but also its owners. The key question that arises is whether there is a link between various types of owners and sustainable corporate governance. A number of related questions emerge. What different types of owners are there and how influential are they in putting their stamp on how their investee firms are managed? Attempting to answer these questions requires revisiting the premise of the principal-agent theory that owners are typically disinterested from engaging with their investee firms. The main critique of this premise is that, even within the Anglo-Saxon corporate governance system, firms tend to have block holders, and there exist activist shareholders. Further, since the 1980s there has been an emergence - as well as an increase in the prevalence - of activist shareholders. Are some types of owners or shareholders more likely to enhance and maintain sustainability than others? A review of extant evidence on the effects of various types of shareholders on long-term financial and non-financial goals suggests the following. While some types of owners are found to promote and support sustainable corporate governance, the effect of other types is less clear or even negative. This difference in effects could be due to three reasons. First, context, including the national setting, is important. Second, some types of investors, such as sovereign wealth funds, show great diversity in their characteristics and objectives. Finally, the goalposts are shifting with an increasing number of investors embracing corporate social responsibility and environmental, social, and governance issues. Importantly, given the increasingly visible consequences of global warming and societal unrest caused by a worsening of wealth inequality, the transition to a more sustainable society should not merely be the responsibility of corporate owners. Others, including corporate executives and business schools, are key to achieving this transition.Publication Earnings management around founder CEO reappointments and successions in family firms(Wiley, 2021-11) Goergen, Marc; Ansari, Iram; Mira, Svetlana; https://ror.org/02jjdwm75This paper studies reappointment of a chief executive officer (CEO) and succession events in listed family firms with an incumbent family CEO. We explore whether family firms with a founder CEO are more likely to engage in earnings management preevent than other family firms. We find evidence of preevent upward earnings management for firms that reappoint their founder CEO but no for other family firms. These findings suggest that the costs and benefits from earnings management change around founder CEO reappointments in family firms. Investors, auditors, policymakers and regulators should be aware of the temptation of founder CEOs to inflate earnings preceding their reappointment.Publication The United Kingdom(Cambridge University Press, 2023-06) Goergen, Marc; https://ror.org/02jjdwm75The product of a long-standing collaboration and recent collective research effort by members of the CGEUI network, The European Corporation makes an important contribution to the ongoing debate over convergence to the Anglo-Saxon model of corporate governance and persistence in corporate governance and law in Europe. This book fills the gap in the debate, and literature's lack of country-specific evidence on the evolution of ownership and control which has proven to be a serious impediment to both legal and economic analysis and evidence-based policymaking. It provides systematic and comparable accounts of ownership and control structure change (respectively persistence) in large firms across Europe over the decades following the 'global corporate governance revolution' in the 1990s. Focusing on countries in Europe's four main regions, this volume presents and discusses the net effects of the interplay between the 'global corporate governance revolution' and of its main countervailing forces in Europe.Publication Does Gender Diversity Affect Renewable Energy Consumption?(Elsevier, 2021-02) Goergen, Marc; Atif, Muhammad; Alam, Md Samsul; Hossain, Mohammed; https://ror.org/02jjdwm75This paper examines the effect of board gender diversity on renewable energy consumption. Using a panel of 11,677 firm-year observations from the USA for 2008–2016, we find a positive relationship between board gender diversity and renewable energy consumption. Moreover, boards require two or more women for women to have a significant impact on renewable energy consumption, consistent with the critical mass theory. Further, we document that the positive impact of female directors on renewable energy consumption stems from female independent rather than Mfemale executive directors. Finally, we find a positive effect of the interaction between renewable energy consumption and board gender diversity on firm financial performance. Our findings are robust to different identification strategies and estimation techniquesPublication Activist Hedge Funds and Takeovers Their Effects on Employment and Performance(Wiley, 2022-01) Goergen, Marc; Kuvandikov, Azimjon; Pendleton, Andrew; https://ror.org/02jjdwm75This paper analyses the impact of activist hedge funds (AHFs) on post-merger workforce downsizing and operating performance. AHFs have been widely criticized for achieving short-term gains at the expense of other stakeholders, such as employees. The results show that AHF ownership and presence in acquiring firms is a significant determinant of post-merger employment reductions. There is little evidence that these mergers and acquisitions have better operating performance relative to other takeovers. However, there is a negative effect of AHF ownership on labour productivity. Overall, the results are consistent with the view that AHF involvement in takeovers does not lead to sustained gains in performance.Publication Dispersed ownership and asset pricing: An unpriced premium associated with free float(Elsevier, 2022-05-09) Hearn, Bruce; Filatotchev, Igor; Goergen, Marc; https://ror.org/02jjdwm75We explore differences in the levels of dispersed ownership that lead to a returns-based free float hedging factor in addition to size, which augments the capital asset pricing model (CAPM) in explaining the cross-section of stock returns. Using the S&P 1500 stocks in the US between 1985 and 2023, the results support the advantages of free float within a three-factor CAPM including size over alternative models based on liquidity, book-to-market value, and momentum. We argue that this yields a useful means for hedging effectively against the risks associated with the fundamental underlying likelihood of expropriation in a specific firm based on its ownership structure.Publication Foreign Venture Capitalists and Access to Foreign Research: The Case of US Initial Public Offerings(Wiley, 2022-01) Goergen, Marc; Saade, Samer; Chahine, Salim; https://ror.org/02jjdwm75We investigate whether foreign venture capital (VC) firms create value above and beyond the value created by domestic VC firms in US initial public offering (IPO) firms. Contributing to an emerging literature on the role and effects of foreign VC firms, we study whether such VC firms enhance innovation by their investee firms. While high levels of innovation are a prerequisite for future value creation, as well as for maintaining the firm's competitive advantage, the extant literature nevertheless suggests that investors struggle with valuing innovation input when firms are about to go public. Ultimately, this results in greater rather than lower IPO underpricing. We argue that foreign VC firms, especially those from countries with high patent activity, increase the innovation levels of their investee firms. In turn, their presence in the VC syndicate signals the greater likelihood of the investee firm successfully turning innovation input (i.e. research and development (R&D) expenditures) into innovation output (i.e. patents), resulting in lower IPO underpricing. Studying a sample of 995 US IPOs conducted during 2000–2016, we find strong and consistent support for the above arguments.Publication Firms’ Rationales for CEO Duality: Evidence from a Mandatory Disclosure Regulation(2020-12) Goergen, Marc; Limbach, Peter; Scholz Daneshgari, Meik; https://ror.org/02jjdwm75Exploiting the 2009 amendments to Regulation S-K, we provide unique evidence on the first-time disclosure of the reasons firms state for combining or separating the roles of CEO and chairman. The stated reasons support both agency theory and organization theory. They are more numerous, comprise more words, and have a more positive tone for firms with duality. Examining the announcement returns to firms’ disclosures, we find that investors evaluate the most frequently cited reasons for CEO duality by considering the firm’s characteristics. Our evidence enhances the understanding of firms’ endogenous decision to opt for CEO duality and its value consequences.Publication Trust and monitoring(Elsevier B.V., 2022) Lesmeister, Simon; Limbach, Peter; Goergen, Marc; Vanderbilt University; University of Antwerp ; Ivey Business School; Western University; Agencia Estatal de Investigación; https://ror.org/02jjdwm75We show that in countries with more societal trust shareholders cast fewer votes at shareholder meetings and are more supportive of management proposals. This result is confirmed by instrumental variable regressions. It also holds at the U.S.-county level and for voting by U.S. institutional investors. Lower monitoring via voting relates less negatively to future firm performance in high-trust countries,suggesting that managers do not exploit greater discretion when trust is high. We also find a negative relation between trust and bond spreads. Our evidence supports theory arguing that trust substitutes for monitoring and has implications for investors’ optimal monitoring effort. © 2022