Comply or Explain? Investor Protection Through Corporate Governance Codes

37 Pages Posted: 11 Apr 2010 Last revised: 3 May 2010

Date Written: March 1, 2010


As a consequence of the financial crisis, the effectiveness of self-regulation has been increasingly questioned. In particular, self-regulatory initiatives on corporate governance have been often put under scrutiny so as to assess whether, by favouring the actual adoption of best practices, these codes are really effective in prompting better governance. Looking at one of the most important features of the Code, this paper tries to address this issue by building up an indicator (so-called CoRe) that assesses the actual level of compliance for Italian listed companies. We find that actual compliance, as measured by the CoRe indicator, is much lower than formal compliance, as declared by issuers. A second finding is that actual compliance is driven by some key aspects of firms’ governance. The CoRe indicator is systematically higher in firms in which: i) minority shareholders have appointed one or more directors; ii) independent directors are organized in a committee; iii) institutional investors, especially if foreign, participate to GMs; iv) normative control enhancing mechanisms are adopted, v) there is no separation between ownership and control by means of pyramids.

Keywords: Self regulation, Related Party Transactions, Compliance Governance indicator

JEL Classification: G32, K22

Suggested Citation

Bianchi, Marcello and Ciavarella, Angela and Novembre, Valerio and Signoretti, Rossella, Comply or Explain? Investor Protection Through Corporate Governance Codes (March 1, 2010). ECGI - Finance Working Paper No. 278/2010, Available at SSRN: or

Marcello Bianchi (Contact Author)

Assonime ( email )

Piazza venezia
Roma 00198

Angela Ciavarella

CONSOB ( email )

Roma 00198

Valerio Novembre

CONSOB ( email )

Via G.B. Martini 3
Roma, 00198
+39068477297 (Phone)

Rossella Signoretti

CONSOB ( email )

Roma 00198

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