Comply or Explain: Investor Protection Through the Italian Corporate Governance Code

17 Pages Posted: 21 Mar 2011

Date Written: March 18, 2011


Nearly 86% of listed Italian companies now claim to be in formal compliance with the provisions of the Italian Corporate Governance Code, which, like many codes in EU countries, give companies the option to either comply or explain their decision not to do so. But in the wake of the recent financial crisis, the effectiveness of such self-regulatory corporate governance codes has been subjected to increasing skepticism. In particular, critics wonder whether such governance codes actually encourage the adoption of best practices and promote better governance. This article presents a governance indicator (CoRe) devised by the authors that attempts to assess the actual, or effective, levels of compliance with the Italian Corporate Governance Code in terms of listed companies' procedures for dealing with related party transactions (RPTs). The authors report that the companies' level of effective compliance with regard to RPTs is considerably lower than their publicly reported levels of formal compliance. The authors also report that higher levels of effective compliance tend to be found in companies where (1) minority shareholders have appointed one or more directors; (2) independent directors serve on important committees; and (3) there are significant holdings by institutional investors - particularly foreign investors - who participate in general shareholder meetings.

Suggested Citation

Bianchi, Marcello and Ciavarella, Angela and Novembre, Valerio and Signoretti, Rossella, Comply or Explain: Investor Protection Through the Italian Corporate Governance Code (March 18, 2011). Journal of Applied Corporate Finance, Vol. 23, Issue 1, pp. 107-121, 2011, 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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