Italian Corporate Governance in the Last 15 Years: From Pyramids to Coalitions?
42 Pages Posted: 20 Dec 2006
Date Written: November 2006
Between 1990 and 2005 the Italian legal and economic framework relating to financial markets experienced major developments (a new Banking Law was passed, institutional investors' role increased in financial markets, the stock market was privatized, a securities law was enacted, a corporate governance code was introduced and then twice revised; a new company law has been enacted; the law on savings has further strengthened shareholders' protection). All these changes should have deeply affected the governance structure of Italian companies.
We provide an in-depth (descriptive) analysis of the evolution of both unlisted and listed corporate governance over the period, with the aim of evaluating the effect of the reforms in the light of the recent theoretical developments. We find limited changes in the ownership and control structures of unlisted firms and listed companies. At the same time there is no substantial increase in the access to stock market.
For both listed and unlisted companies we observe some changes in the instruments used to ensure stability of control. In unlisted companies the aim is pursued through an increasing use of by-laws clauses that restrict the transferability of shares; in listed companies the objective was reached in the past through an extensive use of pyramids, more recently by establishing shareholders' coalitions of various nature, with an increasing relevance of bank-firm relationships.
This evidence shows that no radical change occurred; this suggests on the one side, that it might still be necessary to further strengthen shareholders' protection; on the other side, that the unwillingness of owners to release control is central in understanding the limited separation between ownership and control in Italy. The role of coalitions and the nature of the bank-firm relationships seem to be the main issues for both regulatory and market developments.
Keywords: corporate governance, pyramids, coalitions
JEL Classification: G34, K22
Suggested Citation: Suggested Citation