Institutional Investor Activism in a Context of Concentrated Ownership and High Private Benefits of Control: The Case of Italy

49 Pages Posted: 17 Sep 2013 Last revised: 1 Apr 2014

See all articles by Massimo Belcredi

Massimo Belcredi

Università Cattolica del Sacro Cuore di Milano

Luca Enriques

University of Oxford Faculty of Law; European Corporate Governance Institute (ECGI)

Date Written: March 2014

Abstract

This is a draft chapter for a forthcoming volume, The Research Handbook on Shareholder Power, edited by Randall Thomas and Jennifer Hill (Cheltenham:Edward Elgar). This chapter describes the experience with activist institutional investors in an apparently unfavorable corporate environment (Italy), commonly depicted as one of concentrated ownership, notoriously inadequate legal protection for minority shareholders and an apparent disregard for their interests by controlling shareholders. We document a non-negligible volume of “core” active institutional investment, together with some idiosyncratic forms of activism (the appointment of “minority” directors on the boards of Italian listed companies). We attempt to evaluate whether what we see is genuine shareholder-value oriented activism or a strategy to engage in a privileged relationship with controlling shareholders, in order to share in private benefits of control extraction. We find no sufficient evidence to support a “dark side” view of shareholder activism, at least as a general explanation. Instead, we provide recent anecdotal evidence of initiatives effectively aimed to curb the extraction of private benefits by dominant shareholders.

Keywords: shareholder activism, institutional investors, hedge funds, corporate governance, concentrated ownership, private benefits of control, general meeting

JEL Classification: G34, G38, K22

Suggested Citation

Belcredi, Massimo and Enriques, Luca, Institutional Investor Activism in a Context of Concentrated Ownership and High Private Benefits of Control: The Case of Italy (March 2014). European Corporate Governance Institute (ECGI) - Law Working Paper No. 225/2013. Available at SSRN: https://ssrn.com/abstract=2325421 or http://dx.doi.org/10.2139/ssrn.2325421

Massimo Belcredi (Contact Author)

Università Cattolica del Sacro Cuore di Milano ( email )

Via Necchi 5
20123 Milano
Italy
+39 02 7234.2457 (Phone)
+39 02 7234.2406 (Fax)

Luca Enriques

University of Oxford Faculty of Law ( email )

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St Cross Road
Oxford, OX1 3UL
United Kingdom

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http:/www.ecgi.org

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