What Do Shareholders' Coalitions Really Want? Evidence from Italian voting trusts
AbstractThis paper studies the effects of having multiple large shareholders who share the control of firms, by analysing a unique dataset of Italian shareholders' agreements (voting trusts). We investigate the separation between ownership and control granted by such agreements, showing that, on average, a voting trust owning 52 per cent of the total company's cash-flow rights is able to exercise up to 87 per cent of the total board rights; the wedge is particularly beneficial to the largest shareholder within the voting trust who is able to get the majority of board rights despite owning only a minority fraction of the company's cash-flow rights. Then, an event-study analysis of a sample of voting trusts' announcements is performed. The results support the "entrenchment effects" hypothesis ( Stulz, 1988 ) linking the ownership structure and the firm value, and are consistent with the view that, in Italy, voting trust agreements are mainly aimed at both protecting controlling shareholders from hostile takeovers and entrenching incumbent management. Copyright (c) 2007 The Author; Journal compilation (c) 2007 Blackwell Publishing Ltd.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Corporate Governance: An International Review.
Volume (Year): 15 (2007)
Issue (Month): 2 (03)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0964-8410&site=1
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- Belot, François, 2008. "Shareholder agreements and firm value: Evidence from French listed firms," Economics Papers from University Paris Dauphine 123456789/2940, Paris Dauphine University.
- Carvalhal, Andre, 2012. "Do shareholder agreements affect market valuation?," Journal of Corporate Finance, Elsevier, vol. 18(4), pages 919-933.
- Belot, François, 2010. "Excess control rights and corporate acquisitions," Economics Papers from University Paris Dauphine 123456789/5922, Paris Dauphine University.
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