Bolstering Family Control: Evidence from Loyalty Shares

45 Pages Posted: 1 Aug 2019

See all articles by Emanuele Bajo

Emanuele Bajo

University of Bologna - Department of Economics

Massimiliano Barbi

University of Bologna - Department of Management

Marco Bigelli

University of Bologna - Department of Management

Ettore Croci

Catholic University of the Sacred Heart of Milan

Date Written: July 1, 2019

Abstract

In order to favor shareholder investment over a longer time horizon, Italy introduced loyalty shares in late 2014, which allow double voting rights after a two-year continuous holding period. Italian listed firms which adopted loyalty shares (about 20 percent of those listed in the main market segment) are significantly more likely to be controlled by families and have a more concentrated ownership structure. We report no evidence of a negative market reaction at the announcement’s adoption, nor a reduction in holdings by institutional investors, despite institutional investors generally voting against the introduction of loyalty shares. Notwithstanding the short period of analysis, we find some evidence that controlling shareholders reduce their holdings after loyalty shares are adopted.

Keywords: Loyalty shares, Family firms, Long-term shareholders, Control-enhancing mechanisms

JEL Classification: G32, G34

Suggested Citation

Bajo, Emanuele and Barbi, Massimiliano and Bigelli, Marco and Croci, Ettore, Bolstering Family Control: Evidence from Loyalty Shares (July 1, 2019). European Corporate Governance Institute - Finance Working Paper No. 619/2019. Available at SSRN: https://ssrn.com/abstract=3428887 or http://dx.doi.org/10.2139/ssrn.3428887

Emanuele Bajo

University of Bologna - Department of Economics ( email )

Bologna
Italy

Massimiliano Barbi (Contact Author)

University of Bologna - Department of Management ( email )

via Capo di Lucca 34
Bologna, 40126
Italy
+39 051 2098404 (Phone)
+39 051 246411 (Fax)

HOME PAGE: http://www.sites.google.com/site/massimilianobarbifinance/

Marco Bigelli

University of Bologna - Department of Management ( email )

Via Capo di Lucca 34
Bologna, 40126
Italy
+39 051 2098060 (Phone)
+39 051 6390612 (Fax)

Ettore Croci

Catholic University of the Sacred Heart of Milan ( email )

Largo Gemelli, 1
Via Necchi 9
Milan, MI 20123
Italy

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