Bolstering Family Control: Evidence from Loyalty Shares
45 Pages Posted: 1 Aug 2019
Date Written: July 1, 2019
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: Suggested Citation