Prof. Marc Goergen on Corporate Governance

A commentary in the Fortune Magazine mentions my research on how female directors influence dividend policy. The study itself can be downloaded for free from the Journal of Corporate Finance. The commentary can be found here.

What is the purpose of a corporation? While common law, which prevails in Anglo-Saxon countries, prescribes that the purpose of a firm is to maximize shareholder value, other legal systems tend to accord at least some importance to stakeholders other than the shareholders. For example, the German corporate law system explicitly refers to employee interests while making employee representation on boards of directors mandatory subject to firm size. While such countrywide explanations are useful in answering the question about what the purpose of a corporation should be, they are not helpful for furthering our understanding of the reasons behind the observed heterogeneity in the behaviour of firms from the same legal regime. For example, why do some firms from the same legal regime follow a more shareholder-centric approach while others prioritize the welfare of their employees over their shareholder? Importantly, how do these differences in approach affect firm policy? Read more here.

This is an updated version of my 2019 course outline, which can be found here. All of the practical cases can be obtained from Harvard Business Publishing.
COURSE DESCRIPTION Who Should Take this Course?
Corporate governance is frequently reduced to compliance and box ticking. This course will show you that corporate governance is more than this and that it can be used proactively to create value. The course will also show you that the optimal corporate governance arrangements vary across firms: What may be optimal for a mature firm may not work for an early venture, and vice-versa.

This course is aimed at three different constituencies. First, it is aimed at budding entrepreneurs who want to know more about designing the governance of their ventures in view of ultimately going public. Second, it is also aimed at those who aspire to a career as a non-executive director. Finally, the course should also be of interest to investors and other parties interested in how corporate control, o…

A number of governments (notably those in India, California, and parts of Europe) are pushing for greater female representation in the boardroom. And several studies suggest why: Having women on the board results better acquisition and investment decisions and in less aggressive risk-taking, yielding benefits for shareholders. What’s less clear is why these effects happen. See more.

The effects of women on boards are also discussed in chapter 7 of my corporate governance textbook.

Voting at annual general shareholder meetings (AGMs) has been shown to be valuable. This makes perfect sense as voting gives shareholders a say on important corporate decisions, such as the composition of the board of directors and the approval of mergers and acquisitions. It also enables shareholders to express their support or dissent of the current management. Surprisingly though, voter turnout at AGMs across the world is relatively low with an average of slightly less than 60 percent of voting shares. Nevertheless, there is variation across countries with voter turnout ranging from a low of 41 percent in New Zealand to a high of 100 percent in Cyprus. In addition, the average approval rates for management-initiated proposals range between 84 percent and 100 percent, indicating that shareholders are less likely to show dissent to the firm’s management in some countries compared to others. What explains these variations across countries? ... Read more

While the list of prospective issuers with credit ratings is lengthy, literature is sparse on how ratings from multiple credit rating agencies (CRAs) affect the performance of a company’s initial public offering (IPO). Our research is motivated by the lack of such literature and by Sangiorgi and Spatt (2017), who argue that multiple ratings are socially optimal if the benefit of the additional rating outweighs the cost of information production. This argument aligns with the “shopping hypothesis” and “information production hypothesis” of Bongaerts et al. (2012). Under the former hypothesis, issuers “shop” for an additional rating in hopes of improving … Read more