Extant literature has usually argued that firms that unify dual class shares are likely to increase shareholder value. We examine the universe of Italian dual class unifications over the 1974-2005 period and show that the unification process is considerably more complex than described in prior literature. In over half the universe, Italian voting shareholders are not compensated for allowing their voting rights to be diluted, and, not surprisingly, experience a price decline at the announcement of unifications. While non-voting shares appreciate in value at the announcement there is little evidence that the unification increases total firm value. We argue that share unifications are designed to benefit the controlling shareholders and, in several cases, controlling voting shareholders use the unification to expropriate wealth from minority shareholders.
Expropriations, Unifications and Corporate Governance in Italy / M. Bigelli; R. Rau; V. Mehrotra. - ELETTRONICO. - (2009), pp. 1-35. (Intervento presentato al convegno La conferenza annuale dell'American Finance Association è riconosciuta in campo accademico di gran lunga come la più importante e la più difficile a livello internazionale. tenutosi a San Francisco nel 3-5 gennaio 2009).
Expropriations, Unifications and Corporate Governance in Italy
BIGELLI, MARCO;
2009
Abstract
Extant literature has usually argued that firms that unify dual class shares are likely to increase shareholder value. We examine the universe of Italian dual class unifications over the 1974-2005 period and show that the unification process is considerably more complex than described in prior literature. In over half the universe, Italian voting shareholders are not compensated for allowing their voting rights to be diluted, and, not surprisingly, experience a price decline at the announcement of unifications. While non-voting shares appreciate in value at the announcement there is little evidence that the unification increases total firm value. We argue that share unifications are designed to benefit the controlling shareholders and, in several cases, controlling voting shareholders use the unification to expropriate wealth from minority shareholders.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.