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What Do Shareholders' Coalitions Really Want? Evidence from Italian voting trusts

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  • Gianfranco Gianfrate

Abstract

This 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.

Suggested Citation

  • Gianfranco Gianfrate, 2007. "What Do Shareholders' Coalitions Really Want? Evidence from Italian voting trusts," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(2), pages 122-132, March.
  • Handle: RePEc:bla:corgov:v:15:y:2007:i:2:p:122-132
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    References listed on IDEAS

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    1. Armo Gomes & Walter Novaes, 2001. "Sharing of Control as a Corporate Governance Mechanism," Penn CARESS Working Papers 3756d78204ca49d92aaf1c17c, Penn Economics Department.
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    Cited by:

    1. Drago, Carlo & Millo, Francesco & Ricciuti, Roberto & Santella, Paolo, 2015. "Corporate governance reforms, interlocking directorship and company performance in Italy," International Review of Law and Economics, Elsevier, vol. 41(C), pages 38-49.
    2. repec:dau:papers:123456789/3031 is not listed on IDEAS
    3. Carvalhal, Andre, 2012. "Do shareholder agreements affect market valuation?," Journal of Corporate Finance, Elsevier, vol. 18(4), pages 919-933.
    4. Mauricio Jara-Bertin & Félix J. López-Iturriaga & Ãscar López-de-Foronda, 2008. "The Contest to the Control in European Family Firms: How Other Shareholders Affect Firm Value," Corporate Governance: An International Review, Wiley Blackwell, pages 146-159.
    5. repec:dau:papers:123456789/2940 is not listed on IDEAS
    6. repec:dau:papers:123456789/5922 is not listed on IDEAS

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