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Corporate Governance in Italian Listed Companies

In: Corporate Governance

Author

Listed:
  • Giuseppe D’Onza

    (University of Pisa)

  • Giulio Greco

    (University of Pisa)

  • Silvia Ferramosca

    (University of Pisa)

Abstract

In the past few decades a growing number of research studies have investigated the effect that insider ownership has on other corporate governance variables like the risk of expropriation for the minor shareholders, the demand for outside directors, etc. An increasing number of studies have analyzed the relationship between insider ownership and corporate performance in Anglo-Saxon countries, Continental Europe and emerging economies. Regarding Italy, previous studies on corporate governance have highlighted that a listed company featured by concentrated ownership is likely to have a high incidence of insider shareholders representation on the board. This context might enhance an agency conflicts between large controlling shareholders and other stakeholders like minority shareholders and other outside investors. In this case the presence of an adequate number of non executive and independent directors as well as a functioning board’s committees appear to be fundamental to counterbalancing the power exercised by owner-managers (or by managers-owner) and reduce the risks of private benefits exploitation. The recent changes in Italian normative requirements goes in this direction and recommend the introduction of mechanisms like the presence of independent directors, the CEO duality, the audit and remuneration committee that are not in line with the traditional corporate governance systems of Italian company but might reinforce the level of protection for outside stakeholders. Basing on the aforementioned considerations, the researchers intend to analyze if and how Italian listed companies have changed their governance model to incorporate the new corporate governance rules. A specific focus regards the interaction of insider owners and outsider directors that seem to be a critical factor for the effectiveness of the corporate governance system in Italian context where lots of listed companies are controlled by a family/individual. The theoretical part of the research analyzes the institutional context in which Italian listed companies operate and how it has changed in the last decade and the main research streams that have investigated the interaction between the inside ownership and the outsider directors. The empirical part of the research is based on the analysis of the data collected through an empirical survey of companies listed to Milan Stock Exchange. A total of 145 corporate governance reports (corresponding to about 60 % of the total non-financial listed companies) issued in the period 2006–2010 has been investigated. Some features observed like ownership structure, insider ownership remained the same over the period analyzed while other variables like the percentage of outside shareholders (like hedge funds), the proportion of independent directors, the number of the audit committee meetings changed noticeable. Overall, the results show that the increasing of monitoring mechanism (like a high proportion of independent directors) during the period observed could contribute to reduce the risk of insider opportunistic behaviour.

Suggested Citation

  • Giuseppe D’Onza & Giulio Greco & Silvia Ferramosca, 2014. "Corporate Governance in Italian Listed Companies," Springer Books, in: Samuel O Idowu & Kiymet Tunca Çaliyurt (ed.), Corporate Governance, edition 127, chapter 0, pages 81-100, Springer.
  • Handle: RePEc:spr:sprchp:978-3-642-45167-6_5
    DOI: 10.1007/978-3-642-45167-6_5
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    Citations

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    Cited by:

    1. Pietro Fera & Rosa Vinciguerra, 2022. "Minorities? Representativeness on the Board and their Effect on the Level of Compliance with the Italian RPTs Regulation," FINANCIAL REPORTING, FrancoAngeli Editore, vol. 2022(2), pages 57-88.
    2. Silvia Ferramosca & Giulio Greco & Marco Allegrini, 2017. "External audit and goodwill write-off," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 21(4), pages 907-934, December.
    3. Giuseppe D’Onza & Alessandra Rigolini, 2017. "Does director capital influence board turnover after an incident of fraud? Evidence from Italian listed companies," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 21(4), pages 993-1022, December.
    4. Victor-Octavian Müller & Ionel-Alin Ienciu & Carmen Giorgiana Bonaci & Crina Ioana Filip, 2014. "Board Characteristics Best Practices and Financial Performance. Evidence from the European Capital Market," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 16(36), pages 672-672, May.
    5. Stefania Veltri & Romilda Mazzotta, 2016. "The Association of Board Composition, Intellectual Capital and Firm Performance in a High Ownership Concentration Context: Evidence from Italy," International Journal of Business and Management, Canadian Center of Science and Education, vol. 11(10), pages 317-317, September.
    6. Nicola Moscariello & Michele Pizzo & Dmytro Govorun & Alexander Kostyuk, 2019. "Independent minority directors and firm value in a principal–principal agency setting: evidence from Italy," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 23(1), pages 165-194, March.

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