title: Incorporating Behavioral and Sustainable Aspects into Modern Corporate Finance and Financial Decision-Making
Creators: name: Zare, Fatemeh
Publisher: name: UNSPECIFIED
Year: 2025

description: This thesis investigates the incorporation of behavioral and sustainable aspects in modern corporate finance and the financial decision-making process. Initially, the dissertation takes the perspective of classical corporate finance. Article 1 examines how the process of becoming a publicly-traded company influences subsequent acquisition activities for German IPOs between 1994 and 2018. The findings of this investigation demonstrate a significant likelihood of conducting an acquisition within the first three years following the IPO for German firms with substantial underpricing. Therefore, this underpricing strategy not only attracts a substantial pool of investors but also fosters available liquid capital, thereby, laying the foundation for future acquisitions.
Secondly, this dissertation focuses on behavioral finance. Article 2 examines how analysts actively engage in public earnings conference calls and how both investors and analysts react. For this reason, a sample of 17,201 earnings conference calls of U.S. firms between 2010 and 2019 is analyzed. It is observed that a minority of analysts show high levels of participation, referred to as „active analysts”, while the majority exhibit lower levels of participation, referred to as „less active analysts”. The findings indicate that the stock market positively reacts to the tone of conversations between active analysts and managers, but show no significant response to the specific topics discussed. Moreover, discussing certain topics and the tone of interactions between active analysts and managers lead to higher earnings surprises, increasing the likelihood of companies meeting or beating consensus estimates. Overall, these results demonstrate that active participation benefits managers, enabling smoother discussions and generating shareholder value by presenting a positive company image.
The third section of this dissertation focuses on sustainable finance and consists of three research articles: Articles 3, 4, and 5. Article 3, which constitutes an intersection of behavioral finance and sustainable finance, examines the Goldman Sachs directive, which took effect in 2021. This directive requires from all companies that Goldman Sachs supervises during their IPO the inclusion of women and individuals of non-white ethnic backgrounds on the board of directors. In this context, a comprehensive sample of IPOs mandated by Goldman Sachs in the U.S. and Europe from 2014 to 2020 is analyzed. The findings indicate that there is no significant positive correlation between board diversity and IPO performance. This suggests that the incorporation of gender and cultural diversity within board of directors of U.S. and European firms is still in a state of development.
Article 4 examines how the capital market reacts to the announcement of green bond issuance during the COVID-19 pandemic. It assesses a sample of green bond issuances in Europe from early 2019 to late May 2021. The findings suggest that announcements of green bond issuance during the pandemic negatively impacts the stock prices of companies. This effect is associated with increased business risk, particularly during weeks with higher COVID-19 incidences. The results indicate that, during uncertain periods like the COVID-19 pandemic, investors interpret green bond issuance as a signal that issuers are constrained in using liquidity from conventional corporate bonds, resulting in a negative reaction.
Article 5 examines how the ESG performance of corporations affects their risk of credit default. It analyzes a comprehensive dataset of publicly listed European and U.S. firms from 2004 to 2020.
The findings indicate that larger firms experience reduced default risk with improved ESG performance. In contrast, smaller firms face an increase in default risk associated with ESG performance. This detrimental impact on smaller firms has become more pronounced in recent years. These results underscore the challenges smaller public firms face in addressing ESG issues and highlight the need for measures that make ESG performance equally beneficial for all companies.