Prof. Dr. Kornelia Fabisik, CFA, PRM

Research

Publications

Why Are Firms With More Managerial Ownership Worth Less?
Journal of Financial Economics

with Rüdiger Fahlenbrach, René M. Stulz, and Jérôme Taillard

Abstract: Using more than 50,000 firm-years from 1988 to 2015, we show that the empirical relation between a firm’s Tobin’s q and managerial ownership is systematically negative. When we restrict our sample to larger firms as in the prior literature, our findings are consistent with the literature, showing that there is an increasing and concave relation between q and managerial ownership. We show that these seemingly contradictory results are explained by cumulative past performance and liquidity. Better performing firms have more liquid equity, which enables insiders to more easily sell shares after the IPO, and they also have a higher Tobin’s q.

Selected presentations (*incl. by co-authors):

Drexel Corporate Governance Conference* (Philadelphia, USA, 2019)
Western Finance Association (WFA) (Huntington Beach, USA, 2019)
European Finance Association (EFA)* (Carcavelos, Portugal, 2019)
Global Corporate Governance Colloquia (GCGC)* (Frankfurt, Germany, 2019)

Featured in:

Working papers

Is History Repeating Itself? The (Un)Predictable Past of ESG Ratings
Review and Resubmit at the Journal of Finance
Best Paper Awards at:

2022 Corporate Governance Symposium
2022 Cornell University ESG Investing Research Conference

with Florian Berg and Zacharias Sautner

Abstract: The explosion in ESG research has led to a strong reliance on ESG rating providers. We document widespread changes to the historical ratings of a key rating provider, Refinitiv ESG (formerly ASSET4). Depending on whether the original or rewritten data are used, ESG-based classifications of firms into ESG quantiles and tests that relate ESG scores to returns change. While there is a positive link between ESG scores and firms’ stock market performance in the rewritten data, we fail to observe such a relationship in the initial data. The ESG data rewriting is an ongoing rather than a one-off phenomenon.

Selected presentations (*incl. by co-authors):

Frankfurt School of Finance & Management Brown Bag Series (Nov. 2020)
Fondazione Eni Enrico Mattei (Apr. 2021)
University of St.Gallen - Seminar (Apr. 2021)
University of Oxford - Saïd Business School Seminar (Apr. 2021)
Asian Bureau of Finance and Economic Research (ABFER) Annual Conference (May 2021)
Professional Risk Managers' International Association (PRMIA) Thought Leadership Webinar (Jun. 2021)
13^th Annual Alliance for Research on Corporate Sustainability (ARCS) Research Conference* (Jun. 2021)
Frankfurt School of Finance & Management Conference on ESG Ratings (Sep. 2021)
UN PRI Academic Network Week 2021 (Sep. 2021)
27^th Annual Meeting of the German Finance Association (DGF) (Oct. 2021)
University of Bern - Seminar (Oct. 2021)
Humboldt University of Berlin - Seminar (Nov. 2021)
HEC Paris - Seminar (Dec. 2021)
Corporate Governance Symposium 2022 by Weinberg Center & ECGI (Mar. 2022)
CFA Society Slovakia: ESG Investment Summit 2022 (Apr. 2022)
SFS Cavalcade North America 2022* (May 2022)
National Bank of Slovakia (NBS) - Seminar (Jun. 2022)
European Financial Management Association (EFMA) (Jun. 2022)
2022 Cornell University ESG Investing Research Conference* (Jul. 2022)
2^nd NTHU Symposium on Sustainable Finance and Economics (Aug. 2022)
Tilburg University - Seminar (Sep. 2022)
European Commission DG FISMA - Presentation (Sep. 2022)
Copenhagen Business School (CBS) - Seminar (Dec. 2022)
American Finance Association (AFA) (Jan. 2023)

Featured in:

Awards:

Winner of the John L. Weinberg/IRRCi USD 10,000 Research Award from the Weinberg Center at the University of Delaware (at the 2022 Corporate Governance Symposium by ECGI)
Winner of the Best Paper Award at the 2022 Cornell University ESG Investing Research Conference (USD 10,000)
Runner-up at CFA Society Germany Investment Research Award 2022

Note:

The paper circulated previously under the name: Rewriting History II: The (Un)Predictable Past of ESG Ratings

Why Do U.S. CEOs Pledge Their Own Company's Stock?
(March 2019)

Solo-authored

Abstract: This paper presents the first large-scale empirical analysis of the pledging phenomenon among U.S. CEOs. Between 2007 and 2016, 7.6% of publicly listed U.S. firms disclosed that their CEOs had pledged company stock as collateral for a loan. On average, CEOs pledge 38% of their shares. The mean loan value is an economically sizeable $65 million. CEOs use the funds to either double down (6.0%), hedge their ownership (3.5%), or to obtain liquidity while maintaining ownership (90.5%). My event study results reveal that stock market participants view pledging as value-enhancing, but perceive significant pledging as value-destroying. Similarly, I find no evidence of its negative shareholder value consequences, except for CEOs who engage in significant pledging.

Selected presentations:

EPFL-UNIL Brown Bag Series (Lausanne, Switzerland, 2019)
LSE PhD Seminar (London, United Kingdom, 2019)
SFI Research Days (Gerzensee, Switzerland, 2019)
SFI Academic Job Market Workshop (Lausanne, Switzerland, 2019)
American Finance Association (AFA) PhD Student Poster Session (San Diego, USA, 2020)
INSEAD (Paris, France, 2020)
Goethe University Frankfurt (Frankfurt, Germany, 2020)
Frankfurt School of Finance & Management (Frankfurt, Germany, 2020)
University of Southampton (virtual, 2020)
Junior European Finance Seminar (virtual, 2020)

Do Debt Investors Care About ESG Ratings?
(October 2021)

with Larissa Schäfer and Sascha Steffen

Abstract: A methodology change of an ESG rating provider introduces plausibly exogenous variation in firms’ ESG ratings, which allows us to study their effect on the cost of debt of U.S. firms. We find that loans spreads of downgraded ESG-rated firms in the secondary corporate loan market increase by about 10% compared to non-downgraded ESG-rated firms and compared to before the rating downgrade. ESG rating downgrades do not increase fundamental default risk of the firm but the premium charged by lenders above the spread for default risk. We find that the effect is stronger for firms that are more financially constrained and firms that are more exposed to ESG and, particularly, climate risk concerns. Importantly, we find that also loan spreads of private (unrated) firms in industries especially affected by ESG rating down- grades increased after the methodology change.

Selected presentations (*incl. by co-authors):

Workshop on Sustainable Banking at the University of Zurich (Oct. 2021)
Frankfurt School of Finance & Management Brown Bag Series* (Feb. 2022)
Financial Regulation - Going Green: Interdisciplinary Workshop at the House of Finance (Goethe University) (May 2022)
4^th Endless Summer Conference On Financial Intermediation And Corporate Finance (Aug. 2022)

What Should Everyone Know about ESG Ratings?
(December 2022)

with Sophie-Dorothee Rotermund

Abstract: In 2020, ESG integration surpassed exclusionary screening-based strategies and became the largest sustainable investment strategy globally. Despite their numerous flaws, ESG ratings continue to shape the investment process. We therefore provide an overview of the most common issues that researchers and practitioners should be aware of when working with ESG ratings. The issues we identify pertain to ISS ESG, MSCI ESG, Sustainalytics ESG, S&P ESG, and Refinitiv ESG ratings, among others.