Bolstering Family Control: Evidence from Loyalty Shares

Bolstering Family Control: Evidence from Loyalty Shares

Emanuele Bajo, Massimiliano Barbi, Marco Bigelli, Ettore Croci

Series number :

Serial Number: 
619/2019

Date posted :

August 07 2019

Last revised :

August 07 2019
SSRN Share

Keywords

  • loyalty shares • 
  • family firms • 
  • long-term shareholders • 
  • Control-enhancing mechanisms

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.

Authors

Real name:
Emanuele Bajo
Real name:
Massimiliano Barbi
Professor
Real name:
Marco Bigelli
University of Bologna
Professor
Real name:
Ettore Croci
Università Cattolica del Sacro Cuore Milan