The Determinants of the Voting Premium in Italy: The Evidence from 1974 to 2003

Abstract:     
We examine the voting premium in Italy in the period 1974 to 2003, when it ranged from 1% to 100%. At firm level, the measure of the price differential between voting and non-voting stocks cannot be fully explained without taking into account the effect of the largest shareholder's identity. Family-controlled firms have higher voting premiums, especially when the family owns a large stake in the company's voting equity. We explain this result by showing that families attach greater importance to control and are more prone than other types of controlling shareholders to expropriate the non-voting class of shareholders.

Keywords: Voting premium, voting rights, non-voting shares, Italy

JEL Classifications: G34

Working Paper Series