Effect of Governance Reforms on Corporate Ownership in Italy: Is it Still Pizza, Spaghetti, and Mandolino?

17 Pages Posted: 8 Oct 2009

See all articles by Stefano Mengoli

Stefano Mengoli

University of Bologna - Department of Management

Federica Pazzaglia

University College Dublin

Elena Sapienza

University of Bologna

Abstract

This paper describes the logic that guides the implementation of corporate governance reforms and investigates the extent to which the logic leads to an increase in investor protection.We use the example of Italy, where major governance reforms were passed in 1998 to protect minority shareholders from the risk of expropriation.

Our two-stage mixed-methods longitudinal study (1995–2005) reveals that the reforms were only modestly effective in improving governance practices. On the one hand, we document a greater alignment of cash flow rights and voting rights of ultimate owners after 1998, suggesting that minority shareholders face lower risk of expropriation. Yet, on the other hand, we find that the percentage of firms where control is fully contestable continues to remain low. Our qualitative analysis reveals both facilitators such as institutional investor activism and mandatory provisions, and impediments such as discretionary provisions, weak enforcement, and an ingrained culture of high control.

This study elaborates extant theory on the effectiveness of reforms by adopting a longitudinal design that describes both their underlying logic and their actual effects on business practices. It also offers conceptual clarity to this literature by bringing attention to factors that act as facilitators and impediments to reform efforts.

This study prompts lawmakers in countries endeavoring reforms to encourage participation of institutional investors, as also urges them to consider mandatory provisions, especially those which enhance disclosure and representation.

Suggested Citation

Mengoli, Stefano and Pazzaglia, Federica and Sapienza, Elena, Effect of Governance Reforms on Corporate Ownership in Italy: Is it Still Pizza, Spaghetti, and Mandolino?. Corporate Governance: An International Review, Vol. 17, Issue 5, pp. 629-645, September 2009, Available at SSRN: https://ssrn.com/abstract=1484113 or http://dx.doi.org/10.1111/j.1467-8683.2009.00752.x

Stefano Mengoli (Contact Author)

University of Bologna - Department of Management ( email )

Via Capo di Lucca, 24
http://stefanomengoli.weebly.com/
Bologna, Bologna 40132
Italy

Federica Pazzaglia

University College Dublin ( email )

Belfield
Belfield, Dublin 4 4
Ireland

Elena Sapienza

University of Bologna ( email )

Piazza Scaravilli 2
Bologna, 40100
Italy

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