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Abstract: This paper has investigated the main features of the corporate governance system in Italy within a European perspective. The results of the research conducted among Italian non financial listed companies have been analysed and discussed in terms of issues such as ownership and control structures, executive remuneration and evaluation, the mission of the companies, the role of banks and other financial institutions, capital market and market for corporate control, employees, and the structure and the functioning of the board, considering the role of the chief executive officer, its separation with the role of chairperson, the role of the non executive directors and of the internal audit committee. The particular issues of corporate governance determined by the presence of the blockholder have been analysed. Furthermore, the potential changes on corporate governance that may derive from the Draghi reform in order to provide a solution to the problem of the unsafeguarded interest of the minority shareholders have been briefly underlined. The characteristics of the Italian corporate governance system have then been discussed in comparison to the main corporate governance systems in Europe: France, Germany and the UK. The intent was not to decide which of the corporate governance systems is the best and should be used as a benchmark, rather to explore the differences among the systems and to analyse the relevance of the cultural, historical, and institutional factors as well as some economic factors such as the ownership structure and the degree of separation between ownership and control. Both the so called nation effect and the ownership structure appear to be relevant in defining the issues of corporate governance. In some cases the reality sees the former prevail, whilst in others the latter does. Within a European context, the Italian system of corporate governance seems to be effectively summarised by the expression "weak managers, strong blockholders and unprotected minority shareholders", paraphrasing M. Roe's (1994) sentence.
Abstract: This paper examines some of the accounting ideas that were developed in 1949 by an Italian professor, Aldo Amaduzzi, with regards to positive accounting studies and the content of financial statements. The paper briefly reviews the aim, methodological assumptions and key findings of the so called positive accounting theory based on the works of Jensen (1976), Watts (1977) and Watts and Zimmerman (1978; 1986). The analysis of the early work of Amaduzzi on the contents of financial statements as the equilibrium outcome of a conflict of interests between corporate stakeholders shows that many of the methodological issues on accounting theory stressed by the so called Rochester school of accounting were raised by Amaduzzi (1949). The paper concludes that although some key differences between the Rochester school of accounting and Amaduzzi's thought do exist, the latter may be considered a forerunner of positive accounting theory.
positive accounting theory, accounting history, financial statements, conflict of interests, Italy, stakeholder theory.
Abstract: The paper has discussed to what extent the Parmalat is to be considered as a particularly Italian case. The main characteristics of Parmalat's corporate governance structure have been compared and contrasted with those prevailing among Italian listed companies, as well as with the highest corporate governance standards in Italy. Empirical evidence seems to confirm the lacks of the monitoring structure in making corporate insiders accountable in presence of a corporate governance system characterized by a controlling shareholder. The role of the ownership and control structure (with special regard to the controlling shareholder's role) and of the board of statutory auditors have Italian traits and might suggest that the Parmalat case is particularly Italian scandal. However, Italian corporate governance standards were not completely at fault in the Parmalat case. Parmalat's corporate governance structure failed to comply with some of the key existing Italian corporate governance standards of best practice, such as the presence of independent directors and the composition of the internal control committee. Besides, the role of the external auditor, as well as the internal control committee as non-effective monitors seem to put Parmalat into the global argument case, not very different, mutatis mutandis, from other corporate scandals.
Corporate governance, false accounting, Parmalat, Italy, Europe, auditing, board of statutory auditors, audit committee, blockholder, code of best practice, fraud
Abstract: This paper discusses the role of the board of statutory auditors as a monitoring device within the prevailing Italian corporate governance system, characterised by the presence of a strong blockholder. We describe the structure and functioning of the board of statutory auditors in the listed companies in terms of size, composition, method of appointment, powers, and duties after the changes due to the Draghi reform and the Preda Code of conduct.
Abstract: The paper discusses to what extent Parmalat's failure can be considered a particularly Italian case. The main characteristics of Parmalat's corporate governance structure are compared and contrasted with those prevailing among Italian listed companies as well as with the highest corporate governance standards in Italy. Empirical evidence seems to confirm the lack of a monitoring structure in making corporate insiders accountable in the presence of a corporate governance system characterised by a controlling shareholder. The role of the ownership and control structure (with special regard to the controlling shareholder's role) and of the board of statutory auditors have Italian traits and might suggest that the Parmalat case is a particularly Italian scandal. However, Italian corporate governance standards were not completely at fault in the Parmalat case. Parmalat's corporate governance structure failed to comply with some of the key existing Italian corporate governance standards of best practice, such as the presence of independent directors and the composition of the internal control committee. Besides, the role of the external auditor as well as the internal control committee as non-effective monitors seem to put Parmalat into the global argument case, not very different, mutatis mutandis, from other corporate scandals.
Abstract: Shareholder rights and director remuneration represents a highly debated but still controversial issue in corporate governance. The purpose of this study was to explore why blockholder-dominated listed firms use stock options as directors' remuneration tools. By using a unique hand-collected dataset comprising plans granted by Italian non financial listed companies, this paper shed light on why blockholder-dominated listed companies granted stock option plans to their directors. Specifically, empirical evidence concerning the characteristics and beneficiaries of the stock option plans given to Italian directors suggests that their diffusion may be hardly explained by optimal contracting theory. Optimal contracting theory seems able to explain no more than 40 out of the 161 plans analysed. In fact, we found evidence that other competing theories, such as rent-extraction theory, seem to provide a better explanation of corporate reality in blockholder-dominated listed firms.
corporate governance, stock options, director remuneration, blockholder, expropriation, Italy
Abstract: Accounting for stock options and executive remuneration have been one of the most debated and controversial issues in accounting regulation and corporate governance. The purpose of this study was to analyse the impact of the mandatory adoption of IFRS 2 for accounting of stock options in Italian non financial listed companies. This paper has investigated the economic consequences of recording the cost of stock options at its fair value, in terms of its impact on the companies' reported earnings, the evaluation method choice, and its disclosure in the financial statements as well as its implication on corporate governance. Empirical evidence shows that the introduction of IFRS 2 has increased the personnel costs and reduced the reported earnings. The impact of the mandatory recording of the cost of stock options measured at its fair value was found to be moderate on average. The overall disclosure concerning the beneficiaries of stock options plans, its evaluation and its recording in the financial statements is generally adequate. The mandatory adoption of IFRS 2 seems to have relevant implications for corporate governance as it has reduced the information asymmetry between corporate insiders and outsiders. Firstly, accounting regulation has increased the level of disclosure and has made the "true" cost of stock options unconcealed for minority shareholders and other investors. Secondly, some evidence of creative accounting was found concerning the elusion of the substance over form principle for the accounting of stock options plans set up before 7th November 2002. Thirdly, the empirical evidence concerning the beneficiaries of the stock options plans suggests that the diffusion of stock options plans in Italian non financial listed companies may be partly explained by the rent-extraction theory, rather than by the optimal contracting theory.
accounting standards, corporate governance, stock options, ifrs, executive remuneration, Italy
Abstract: This paper examines some of the accounting ideas that were developed in the late 1940s by an Italian professor, Aldo Amaduzzi, with regards to positive accounting studies and the content of financial statements. The paper briefly reviews the aim, methodological assumptions and key findings of the so called positive accounting theory based on the works of the Rochester school of accounting. A content analysis of the early work of Amaduzzi, in relation to his view that the contents of financial statements can be seen as the equilibrium outcome of a conflict of interests between corporate stakeholders, shows that many of the methodological issues on accounting theory stressed by the 'Rochester school of accounting' were raised by Amaduzzi (1947, 1949). The paper concludes that although some key differences between the two approaches do exist, Amaduzzi may be considered a forerunner of positive accounting theory.
positive accounting theory, accounting history, financial statements, conflict of interests, Italy, stakeholder theory
Abstract: This paper examined the key issues related to the effects of introduction of fair value in a stakeholder-oriented accounting system. In particular, it discussed how the decision of the Italian policymaker to limit the distribution to shareholders of fair value gains is rooted on the importance of prudence in the Italian legal and GAAP framework. The paper seek to explore how the importance of the 'prudence' principle in the Italian legal and GAAP framework seems mainly due to the influence of broadly defined corporate governance issues, such as ownership, control and capital structures that characterise Italian listed companies, the concept of the corporation as generally accepted in Italy, and cuntural issues, in relation to prudence, risk-taking and uncertainty avoidance. This paper argued that the Italian regulator decision seems able to safeguard the interests of a wide range of corporate stakeholders, without lowering the quality of information to investors, and provided an example of income statement section (named comprehensive income statement) in which fair value gains and losses may be disclosed.
fair falue, IFRS, Italy, corporate governance, comprehensive income statement, stakeholders, accounting systems
Abstract: This paper provides a case study which describes corporate governance structures and mechanisms at Telecom Italia S.p.A. Telecom Italia is one of the largest Italian companies. It is listed both on the Italian Stock Exchange, where it is a 'blue-chip' company, and on the New York Stock Exchange (NYSE), so that it is subject to US securities laws and, in particular, to the Sarbanes-Oxley Act. Since its privatisation in 1997, Telecom Italia has offered some examples of how minority shareholders may face difficulties to have their interest safeguarded. However the paper describes how Telecom Italia has tried to improve its corporate governance, which may currently be considered an Italian best practice, thanks to the company's efforts to strengthen minority shareholders' protection in order to be more competitive in capital markets.
corporate governance, case study, Telecom, Italy, Europe, audit committee
Abstract: The paper has described and examined the most relevant corporate governance developments in Italy, taking into account both the normative developments, such as laws and codes of conducts, as well as actual developments in corporate practices. Taking into accounting the ownership and control structure of Italian listed companies, the paper has examined the key corporate governance developments in Italy, including the 1998 Draghi law, the Preda Code of conduct and some of most recent developments concerning corporate governance after the Parmalat scandal. Regulation and actual corporate practice have been changing fast in the recent years, although they have not solved completely the key corporate governance issue concerning the relationship between controlling shareholders and minority shareholders. The paper reports that the overall awareness of the importance of corporate governance issues has increased among senior managers and directors of Italian listed companies.
Corporate governance, Italy, code of best practice, IFRS, auditor rotation, Parmalat
Corporate governance, Italy, code of best practice, IFRS, auditor rotation
Abstract: This paper analyses and discusses the "positive" issues of the overriding international financial reporting standards principle of "true and fair view" in connection with corporate governance mechanisms. The analysis is based on case study evidence. Empirical evidence from the Parmalat case with regards to the role of the information supply and demand side agents is analysed. This study provides evidence on how the relationship between corporate financial reporting and corporate governance mechanisms may influence the enforcement of the international financial reporting standards overriding principle of "true and fair view". Evidence is found that the enforcement of the "true and fair view" principle is intrinsically flawed when the accountability and the overall corporate governance systems do not work properly. Some evidence is also found for the argument that a lack in the quality of information supplied by the corporate financial system hurdles the role information demand side agents as effective monitors.
Financial reporting, corporate governance, Parmalat, accounting principles, GAAP, accountability, financial analyst, auditing
Abstract: This paper describes and analyzes the issues of financial reporting and corporate communication in connection with corporate governance. The analysis is based on the studies conducted in the Anglo-American and the European academic literature both from a normative and a positive perspective. It is discussed why accounting standards are not able by themselves to avoid corporate "miscommunication", and how a good corporate governance system is a sine qua non to improve the quality of corporate communication and financial reporting. The analysis also shows how the effectiveness of the systems of financial reporting and corporate governance seems to be highly correlated.
Financial reporting, corporate governance, corporate communication, normative accounting, positive accounting
Abstract: This paper examines the Parmalat case, with particular regard to the accounting and corporate governance issues which caused the scandal. The aim of the paper is to understand why the financial reporting system and the corporate governance system have failed in the Parmalat case. It describes the ownership and control structure at Parmalat, with special attention to the role of the Tanzi family as ultimate controlling shareholder. It argues that although financial misreporting is the most evident issue, it is not due to a lack of the generally accepted accounting principles that allowed Parmalat to obscure its true financial position. The role of the board of statutory auditors, the auditing firm, and the board of directors is examined to describe the failure of these gatekeepers. The paper also investigates the role of demand side information agents, with a particular focus on financial analysts, and discusses to what extent an external analyst could have been suspicious of Parmalat's reported economics and financial results.
Corporate governance, accounting, Italy, Europe, audit, Parmalat, gatekeeper, financial reporting, financial statement analysis, board of statutory auditors, fraud
Abstract: This paper has analysed the Italian prevailing corporate governance system in terms of issues such as ownership and control structures, structure and functioning of the boards, executive remuneration and evaluation, the mission of the companies, the role of banks and market for corporate control. The issues determined by the presence of the blockholder have been analysed as well as the changes that derive from the Draghi reform. The Italian system of corporate governance seems to be effectively summarised by the expression 'weak managers, strong blockholders and unprotected minority shareholders', paraphrasing Roe's (1994) sentence. Key Words: Corporate governance, Italy, Boards of Directors, Non executive directors, Large shareholder, Blockholder
Abstract: This paper has investigated the main features of corporate governance concerning the Italian non financial listed companies. The empirical research is based on a sample with 52 non financial companies listed at the Milan Stock Exchange (Italy). The corporate governance issues are defined in a wide way, including the ownership and control structures, the composition of the board of directors and the role of non executive directors, the role of banks and employees as potential strategic stakeholders, executive remuneration.
corporate governance, italy, non financial companies
Abstract: Accounting for stock options and share-based remuneration is a controversial issue. The purpose of this study is to explore the impact of the mandatory adoption of IFRS 2 on accounting for share-based remuneration by Italian listed companies. The requirements under this standard could have relevant implications for corporate governance as IFRS 2 is expected to reduce the information asymmetry that may exist between corporate insiders and outsiders regarding such remuneration. Empirical evidence confirms that overall disclosure in annual reports concerning the costs of remuneration plans has increased following the adoption of IFRS 2, although some cases of lack of disclosure have also been found. We find that this change in accounting regulation has contributed towards revealing the 'true' cost of share-based remuneration to minority shareholders and other investors, together with some evidence of creative accounting surrounding the substance over form principle.
accounting regulation, corporate governance, disclosure, IFRS 2, Italy, share-based remuneration, stock options
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