## 1. Italy: National Corporate Reform ## Source details **Canonical URL:** [1. Italy: National Corporate Reform](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2008/_wp0891.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2008/_wp0891.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2008/_wp0891.pdf.json) --- ### Introduction and research questions - Corporate governance defined as system directing and controlling companies for shareholders' benefit. - Two central questions: - Have corporate governance reforms reduced private benefits of control in Europe? - Have reforms produced de facto convergence in corporate governance regimes and integration in the market for corporate control in Europe? - Main contribution: quantitative analysis using a market-based proxy for private benefits of control (the voting premium). ### National and EU reforms (scope and targets) - National reforms (France, Germany, Italy) targeted: - Empowering minority shareholders (e.g., “one-share one-vote”, “mandatory bid” rules). - Enhancing internal governance (board effectiveness, rules on related-party transactions). - Improving disclosure requirements (corporate governance codes, stricter rules on self-dealing, compensation, financial reporting, audit). - Strengthening public enforcement (expanded supervisory authority powers; sanctions against market abuse). - EU reforms aimed at harmonization/integration (examples listed in source: Transparency Directive, Market Abuse Directive, Prospectus Directive, IAS/IFRS regulation, Takeover Bids Directive, etc.). - Distinction emphasized: - De jure convergence: substantial evidence of legal harmonization. - De facto convergence: scarcer evidence; this paper uses voting-premium series to examine de facto changes. ### Measuring the private value of control - Voting premium definition used: - VP = (PH - PL) / PL - PH = price of a voting right (high-voting share) - PL = price of a cash flow right (low-voting share) - Rationale: - Simpler and comparable across firms with different voting arrangements. - Suitable for time-series analysis. - Acknowledged possible upward bias; time-series comparisons remain informative. ### Data and methodology - Sample construction and period: - DataStream country lists; period January 1, 1992 to December 31, 2007. - Inclusion criteria: (a) at least two classes of shares with different voting rights; (b) both classes publicly traded; (c) low-voting class not convertible into high-voting class; (d) neither class receives a fixed dividend independent of the other; (e) neither class is redeemable or callable. - Countries: France, Germany, Italy, Denmark, Finland, Sweden, U.K., Norway, Canada. - Final sample: 342 firms (period averages by country reported elsewhere). - Price data and frequency: - Wednesday-to-Wednesday weekly closing data on share prices and control variables from DataStream and Bloomberg. - Voting premium calculated per firm using VP formula and averaged for each year. - Empirical strategy: - Compare C3 (France, Germany, Italy) with two control groups: - EU control group: Denmark, Finland, Sweden, U.K. - non-EU control group: Norway, Canada. - Panel regressions with firm fixed effects and country dummies. - Two main specifications: - Specification 1 (parsimonious): VP_{i,t,y+1} = Σ_{c=1}^{9} α_c D_c + Σ_{y=1992}^{2006} β_y D_y + δ_i + ε_it - Specification 2 (with interactions): VP_{i,t,y+1} = Σ_{c=1}^{9} α_c D_c + Σ_{y=1992}^{2006} β_y D_y + Σ_{c,y} λ_{c,y} D_{c,y} + δ_i + ε_it - Convergence analysis: - Standard deviation of country-specific voting premiums across seven EU countries each year. - Pooled firm-level distributions across EU countries by year to analyze compression over 1992–2007. - Robustness: inclusion of an index of product market reforms (PMR) in some specifications. ### Sample counts and summary statistics (preserve reported numbers) - Table 5. Number of Dual-Class Firms by Country (1992–2007 period average): - Canada 49 - Denmark 34 - Finland 28 - France 15 - Germany 68 - Italy 80 - Norway 14 - Sweden 32 - UK 22 - Total 342 - Table 6. Voting Premium: Summary Statistics (Sample average,1992-2007): - Canada: Sample size 37,818 — Mean 0.15 — Median 0.02 - Denmark: Sample size 24,384 — Mean 0.13 — Median 0.01 - Finland: Sample size 21,227 — Mean 0.13 — Median 0.03 - France: Sample size 2,653 — Mean 0.50 — Median 0.20 - Germany: Sample size 52,038 — Mean 0.11 — Median 0.09 - Italy: Sample size 63,204 — Mean 0.46 — Median 0.31 - Norway: Sample size 11,699 — Mean 0.04 — Median 0.02 - Sweden: Sample size 19,859 — Mean 0.01 — Median 0.00 - UK: Sample size 17,928 — Mean 0.31 — Median 0.19 - Overall: Sample size 250,810 — Mean 0.21 — Median 0.06 ### Main empirical findings (year effects, distributed effects, and interactions) - Cross-country averages (1992–2007): - France: 50 percent - Italy: 46 percent - Germany: 11 percent - Sweden: below 1 percent - Norway: below 1 percent - U.K.: average somewhat higher than earlier studies (previously 13 to 16 percent) due to more recent data and upward trend - Denmark, Finland, Canada: on par with Germany (around 11 percent) - Time trends and magnitude: - C3 countries experienced dramatic declines in voting premiums over the past 15 years. - Italy: from above 100 percent in the early 1990s to just above 20 percent in 2007. - EU-wide downward trend in voting premiums; premiums flat or edging up in non-EU sample countries (Canada, Norway). - Year-dummy fixed-effect estimates (Table 7: one-year lead): - Example coefficients (year dummy coefficients): - yd93 -0.073 (Std. err. 0.006) P>|t| 0.000 - yd94 -0.205 (0.006) 0.000 - yd95 -0.218 (0.006) 0.000 - yd96 -0.224 (0.006) 0.000 - yd97 -0.246 (0.006) 0.000 - yd98 -0.281 (0.006) 0.000 - yd99 -0.262 (0.006) 0.000 - yd00 -0.243 (0.006) 0.000 - yd01 -0.284 (0.006) 0.000 - yd02 -0.316 (0.006) 0.000 - yd03 -0.339 (0.006) 0.000 - yd04 -0.352 (0.006) 0.000 - yd05 -0.338 (0.006) 0.000 - yd06 -0.325 (0.006) 0.000 - yd07 -0.306 (0.006) 0.000 - _cons 0.469 (0.005) 0.000 - R within 0.288; R2 between 0.008; R2 overall 0.19 - Distributed year effects (two- and three-year leads; Table 8): - Reform-heavy years show persistent negative coefficients: - yd98 -0.291 (0.008) 0.000 - yd01 -0.297 (0.008) 0.000 - yd02 -0.329 / -0.328 (0.008) 0.000 - yd03 -0.352 / -0.351 (0.008) 0.000 - yd04 -0.363 (0.008) 0.000 - yd05 -0.350 (0.008) 0.000 - yd06 -0.332 (0.008) 0.000 - _cons 0.476 (0.006) 0.000 - R within 0.018; R2 between 0.192; R2 overall 0.190 - Relative effectiveness by country (interaction effects; Table 9 highlights): - Selected coefficients (Coef. Std. err. P>|t|): - 1998: - France 0.061 0.087 0.482 - Germany -0.018 0.009 0.041 - Italy -0.029 0.008 0.001 - 2001: - France -0.203 0.050 0.000 - Germany -0.005 0.009 0.596 - Italy -0.171 0.008 0.000 - 2002: - France -0.601 0.038 0.000 - Germany -0.041 0.009 0.000 - Italy -0.276 0.008 0.000 - 2003: - France -0.519 0.034 0.000 - Germany -0.078 0.009 0.000 - Italy -0.324 0.008 0.000 - 2004: - France -0.297 0.034 0.000 - Germany -0.074 0.009 0.000 - Italy -0.335 0.008 0.000 - 2005: - France -0.096 0.032 0.003 - Germany -0.057 0.009 0.000 - Italy -0.310 0.008 0.000 - 2006: - France 0.292 0.029 0.000 - Germany -0.037 0.009 0.000 - Italy -0.286 0.008 0.000 - Control-group aggregates reported (EU and non-EU) with coefficients and significance in Table 9. - Summary of relative effectiveness (Table 10): - 1998: Italy yes/yes; France no/no; Germany yes/yes - 2001–05: Italy yes (significant)/yes; France yes/yes; Germany yes/yes - 2006: Italy yes/yes; France no, wrong direction/yes but wrong direction of the control; Germany yes/yes - Accounting for product market reforms (PMR included; Table 11 and Table 12): - PMR has a positive and significant coefficient where included (e.g., PMR 0.238 0.004 0.000 in Table 11; PMR 0.133 0.002 0.000 in Table 12). - When PMR included, Italy continues to show significant negative interaction coefficients in reform years, indicating robustness to accounting for product market reform changes. - Table 11 selected year dummies (with PMR): - yd93 -0.005 0.006 0.392 - yd94 -0.094 0.006 0.000 - yd95 -0.035 0.007 0.000 - yd96 -0.002 0.007 0.804 - yd97 0.009 0.007 0.187 - yd98 0.004 0.007 0.635 - yd99 0.104 0.008 0.000 - yd00 0.174 0.009 0.000 - yd01 0.180 0.009 0.000 - yd02 0.211 0.010 0.000 - yd03 0.206 0.010 0.000 - PMR 0.238 0.004 0.000 - _cons -0.548 0.016 0.000 - R within 0.150; R2 between 0.172; R2 overall 0.173 ### Convergence evidence and distributional dynamics - Standard deviation of country voting premiums (convergence indicator): - 1992: 0.43 - 1995–97: 0.22–0.26 - 1998–99: 0.17 - Decline in dispersion broadly coincides with EU and national reform periods. - Pooled EU voting premium means and confidence intervals (Table 13: Distribution Characteristics): - 1992 Mean 0.492 Std. err. 0.0125 95% CI 0.468 0.517 - 1993 Mean 0.413 Std. err. 0.0109 95% CI 0.392 0.434 - 1994 Mean 0.276 Std. err. 0.0063 95% CI 0.263 0.288 - 1995 Mean 0.260 Std. err. 0.0054 95% CI 0.250 0.271 - 1996 Mean 0.246 Std. err. 0.0051 95% CI 0.237 0.256 - 1997 Mean 0.224 Std. err. 0.0045 95% CI 0.215 0.232 - 1998 Mean 0.184 Std. err. 0.0039 95% CI 0.177 0.192 - 1999 Mean 0.201 Std. err. 0.0039 95% CI 0.193 0.209 - 2000 Mean 0.220 Std. err. 0.0042 95% CI 0.212 0.229 - 2001 Mean 0.176 Std. err. 0.0040 95% CI 0.168 0.184 - 2002 Mean 0.144 Std. err. 0.0045 95% CI 0.135 0.152 - 2003 Mean 0.121 Std. err. 0.0041 95% CI 0.113 0.129 - 2004 Mean 0.108 Std. err. 0.0038 95% CI 0.100 0.115 - 2005 Mean 0.121 Std. err. 0.0040 95% CI 0.113 0.129 - 2006 Mean 0.138 Std. err. 0.0045 95% CI 0.129 0.147 - 2007 Mean 0.180 Std. err. 0.0064 95% CI 0.168 0.193 - Figures (descriptive): - Figure 1: Dynamics of Voting Premiums Across Countries, 1992–2007 (annual averages). - Figure 2: Reform Efforts: Number of Important Corporate Governance Reforms Per Year. - Figure 4: Convergence in Voting Premiums Across Countries (standard deviation over 1992–2007). - Figure 5: Distribution of Voting Premiums Across EU Countries, by Year. ### Conclusions (as reported) - The voting-premium approach provides a market-based quantification of private benefits of control and the effects of corporate governance reforms. - Reforms have been successful in reducing voting premiums EU-wide, with particularly strong results in France, Germany, and Italy (C3). - More intense and broader reform efforts (national reforms beyond EU-wide initiatives) are associated with higher and longer-lasting reductions in voting premiums. - Evidence suggests increased integration of the market for corporate control in Europe, as indicated by reduced dispersion in voting premiums across countries and over time. *Source: _wp0891 - 1. Italy: National Corporate Reform (PDF chapter list and figures as provided).* ### 1. Italy: National Corporate Reform .................................................................................... ### 1. Italy: National Corporate Reform ### Contents and related sections (as listed in the source) - 1. Italy: National Corporate Reform ........................................................................................16 - 2. Germany: National Corporate Governance Reforms...........................................................17 - 3. France: National Corporate Governance Reforms...............................................................18 - 4. EU Corporate Governance Reforms ....................................................................................19 - 5. Number of Dual-Class Firms by Country ............................................................................20 - 6. Voting Premium: Summary Statistics..................................................................................20 - 7. Voting Premiums Year Effects ............................................................................................21 - 8. Voting Premium Distributed Year Effects...........................................................................21 - 9. Relative Effectiveness of Reforms in C3 Compared to the EU and Non-EU Peers, by Year....................................................................................22 - 10. Relative Effectiveness of Reforms Compared to Control Groups: A Summary ...............23 - 11. Voting Premiums: Year Effects, Accounting for Product Market Reforms ......................23 - 12. Relative Effectiveness of Reforms in C3 Compared to the EU and Non-EU Peers, Accounting for Product Market Reforms, by Year .............................................................24 - 13. Distribution Characteristics of Voting Premiums, Pooled for All EU Countries ..............25 ### Figures referenced for the chapter - Figure 1. Dynamic of the Voting Premiums Acorss Countries, 1992–2007.......................................26 - Figure 2. Reform Efforts: Number of Important Corporate Governance Reforms Per Year..............27 - Figure 3. Number of National and EU Corporate Governance Reforms ............................................28 - Figure 4. Convergence in Voting Premiums Across Countries ..........................................................28 - Figure 5. Distribution of Voting Premium Across EU Countries, by Year ........................................29 ### What this content unit covers (organizational summary) - National corporate governance reform in Italy is presented as the first listed section of a multi-country comparative treatment of corporate governance reforms. - The chapter is organized alongside parallel national treatments (Germany, France) and EU-level reforms, followed by analytical sections on dual-class firm counts, voting premium statistics, year effects, and assessments of reform effectiveness relative to peers and control groups. - Empirical materials include time-series visuals covering 1992–2007 and cross-country distributions of voting premiums. *Source: _wp0891 - 1. Italy: National Corporate Reform (PDF chapter list and figures as provided)* ### References.............................................................................................................. ### _wp0891 - References.............................................................................................................. ### Introduction - Corporate governance is defined as the system by which companies are directed and controlled for the benefit of shareholders. - Better governance practices can lead to higher firm valuation, rates of return, and performance by mitigating agency problems and reducing inefficient investments. - Private benefits of control are the value that controlling shareholders can extract to the detriment of minority shareholders; institutional determinants include the legal environment, takeover rules, and corporate charter provisions. - The paper asks two main questions: - Have corporate governance reforms succeeded in improving corporate governance and curbing the power of dominant shareholders in Europe (i.e., reduced private benefits of control)? - Have the reforms achieved de facto convergence in corporate governance regimes and integration in the market for corporate control in Europe? - Main contribution: quantitative analysis using a financial market–based proxy for private benefits of control (the voting premium). ### National and EU Reforms - National reforms (focus on France, Germany, Italy) targeted four areas: - Empowering minority shareholders (e.g., “one-share one-vote”, “mandatory bid” rules). - Enhancing internal governance (e.g., board effectiveness, rules on third-party transactions). - Improving disclosure requirements (corporate governance codes, stricter rules on self-dealing, compensation, financial reporting, audit). - Strengthening public enforcement (more powers to supervisory authorities, sanctions against market abuse). - EU reforms aimed at harmonizing/integrating company law and corporate governance (examples include Transparency Directive, Market Abuse Directive, Prospectus Directive, IAS/IFRS regulation). - Distinction emphasized between de jure convergence (substantial evidence) and de facto convergence (scarcer, more indirect evidence). This paper uses a novel market-based proxy to examine de facto convergence. ### Measuring the Private Value of Control - Two measurement approaches in literature: - Voting premium in dual-class firms. - Price difference between control blocks and regular shares. - This paper focuses on the voting premium. Definition used: - VP = (PH - PL) / PL - where PH = price of a voting right (high-voting share) and PL = price of a cash flow right (low-voting share). - Rationale: - Simpler, comparable across firms with different voting arrangements. - Suitable for time-series analysis despite possible upward bias. - Doidge (2004) shows alternative weighting schemes do not change time-series or cross-firm comparison results. ### Data and Methodology - Sample construction: - DataStream country lists from 1992 to 2007. - Inclusion criteria: (a) at least two classes of shares with different voting rights; (b) both share classes publicly traded; (c) low-voting class not convertible into high-voting class; (d) neither class receives a fixed dividend independent of the other class; (e) neither class is redeemable or callable. - Countries in sample: France, Germany, Italy, Denmark, Finland, Sweden, U.K., Norway, Canada. - Final sample: 342 firms. - Country variation: more than 80 in Italy, 68 in Germany, 15 in France; each control-country has at least 20 dual-class firms. - Price data: - Wednesday-to-Wednesday weekly closing data on share prices and control variables from DataStream and Bloomberg. - Period: January 1, 1992 to December 31, 2007. - Voting premium calculated per firm using VP formula and averaged for each year. - Empirical strategy: - Compare dynamics of voting premium in C3 (France, Germany, Italy) with two control groups: EU control group (Finland, Denmark, Sweden, U.K.) and non-EU control group (Norway, Canada). - Panel regression framework with firm-specific fixed effects and country dummies. - Specification 1 (parsimonious): - VP_{i,t,y+1} = Σ_{c=1}^{9} α_c D_c + Σ_{y=1992}^{2006} β_y D_y + δ_i + ε_it - Specification 2 (interaction terms): - VP_{i,t,y+1} = Σ_{c=1}^{9} α_c D_c + Σ_{y=1992}^{2006} β_y D_y + Σ_{c,y} λ_{c,y} D_{c,y} + δ_i + ε_it - Convergence analysis: - Compute standard deviation of country-specific voting premiums across seven EU countries each year. - Pool all firm-level observations across EU countries each year to analyze distribution compression over 1992–2007. ### Main Findings - Cross-country voting premium averages (1992–2007): - France: 50 percent - Italy: 46 percent - Germany: 11 percent - Sweden: below 1 percent - Norway: below 1 percent - U.K.: average somewhat higher than earlier studies (previously 13 to 16 percent) due to more recent data and upward trend - Denmark, Finland, Canada: on par with Germany (around 11 percent) - Time trends: - C3 countries (Germany, Italy, France) experienced dramatic declines in voting premiums over the past 15 years. - Italy: from above 100 percent in the early 1990s to just above 20 percent in 2007. - EU-wide downward trend in voting premiums; premiums flat or edging up in non-EU sample countries (Canada, Norway). - Reform timing and intensity: - Most reform-heavy years identified: 1998 and 2001–05. - Econometric evidence: - Panel estimates controlling for firm- and country-specific effects indicate greater reform efforts are associated with a substantial reduction in the voting premium in the following year. - Larger negative and statistically significant coefficients on dummy variables for 1998 and 2001–05 relative to surrounding years. - Two- and three-year lead dependent-variable specifications show longer-lasting reductions associated with deeper reform effort. - Interaction terms (country × year) are generally negative and significant for C3 countries, indicating larger reductions in voting premiums compared with control groups. - Exception: 1998 for Germany and France and 2001 for Germany (negative but not significant). - Italy shows consistently higher and significant coefficients for reform-heavy years. - Results robust to inclusion of an index of product market reforms (Berger and Danninger (2006) style), implying voting premiums declined more after reform-heavy years even accounting for other reforms. - Convergence evidence: - Standard deviation of country voting premiums: - 1992: 0.43 - 1995–97: 0.22–0.26 - 1998–99: 0.17 - The decline in dispersion broadly coincides with the period of EU and national reforms. - Pooled firm-level distributions for EU countries show compression over time, supporting convergence in private benefits of corporate control. ### Conclusions - The voting-premium approach provides a market-based quantification of private benefits of control and the effects of corporate governance reforms. - Reforms have been successful in reducing voting premiums EU-wide, with especially strong results in France, Germany, and Italy (C3). - More intense and broader reform efforts (national reforms beyond EU-wide initiatives) are associated with higher and longer-lasting reductions in voting premiums. - Evidence suggests increased integration of the market for corporate control in Europe, as indicated by reduced dispersion in voting premiums across countries and over time. *Source: _wp0891 - References (content provided).* ### References ### _wp0891 - References ### Literature and empirical sources - Citations include theoretical and empirical work on corporate governance, voting rights, private benefits of control, insider trading, market regulation, and convergence of governance practices. Representative entries: - Becht, M., and C. Mayer, 2001, The Corporate Control of Corporate Europe (Oxford: Oxford University Press.) - Jensen, M., and W. Meckling, 1976, “Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure,” Journal of Financial Economics, Vol.3, pp. 305–60. - La Porta, R., F. Lopez-de-Silanes, A. Shleifer, and R. Vishny, 1997, “Legal Determinants of External Finance,” Journal of Finance, Vol. 52, pp. 1131–50. - Dyck, A., and L. Zingales, 2004, “Private Benefits of Control: An International Comparison,” Journal of Finance, Vol. 59, pp. 537–600. - Shleifer, A., and R. Vishny, 1997, “A Survey of Corporate Governance,” Journal of Finance, Vol. 52, pp. 737–83. - Studies and working papers cited include CESifo Working Paper No. 1709; CEPR Discussion Paper No. 6108; ECGI Working Paper No. 165; DataStream as data source for empirical tables. ### National corporate governance reform chronologies (selected) - Italy: National Corporate Governance Reforms (selected items and years) - 1991: Criminal sanctions for insider trading — Specific area: Sanctions; General area: Public enforcement - 1998: New rules on board's information; Minorities represented in board of auditors and in board of directors; Lower thresholds for minority shareholder rights; Mandatory bid rule; Increased regulator's investigative and sanctioning powers; Criminal sanctions for market manipulation. Areas include Board effectiveness, Shareholder empowerment, Private enforcement, Public enforcement, Disclosure. - 1999: Annual disclosure of individual directors' compensation — Self-dealing and compensation; Disclosure - 2002: Immediate disclosure of material related-party transactions — Self-dealing and compensation; Disclosure - 2003: New rules on board's information; Voting caps banned; Sale of corporate shareholdings tax-exempt; Direct shareholder suit against parent company for damages stemming from abuse of corporate control; Increased regulator powers — Internal governance, Shareholder empowerment, Private enforcement, Public enforcement, Disclosure - 2005: Corporate governance code mandated on a comply-or-explain basis; Audit partner rotation, 6 years, and firm rotation, 12 years; Prohibition on nonaudit services to audit clients; General manager's and CFO's statement on truth of financial reports — Corporate governance and Financial reporting and audit; Disclosure; Public enforcement - 2006: Contingency fees allowed — Private enforcement; Shareholder empowerment - Source: Enriques and Volpin (2007). - Germany: National Corporate Governance Reforms (selected items and years) - 1994: Securities regulator set up; Criminal sanctions for insider trading — Powers of supervisory authority; Sanctions against market abuse; Public enforcement - 1998: Greater role for supervisory board; Specific duties on risk management and internal controls; Multiple voting shares banned and banks' influence over shareholder meetings curbed; Audit partner rotation, 7 years — Board effectiveness; One-share one-vote rules; Financial reporting and auditing; Disclosure - 2001: Exercise of voting rights made easier — Shareholder empowerment - 2002: Sale of corporate shareholdings tax-exempt; Mandatory bid rule; Corporate governance code mandated on a comply-or-explain basis; Merger of securities and banking authorities; Criminal sanctions for market manipulation (2002) — Shareholder empowerment; Public enforcement; Disclosure - 2003–2005: Civil actions for securities fraud made easier; Prohibition on nonaudit services to audit clients; Securities' agency review of financial reports; German "PCAOB" (2004); Communication among shareholders facilitated; Derivatives suits made easier; Annual disclosure of individual directors' compensation (2006) — Private enforcement; Disclosure; Public enforcement - Source: Enriques and Volpin (2007). - France: National Corporate Governance Reforms (selected items and years) - 1992: Mandatory bid rule — Control transactions; Shareholder empowerment - 2001: Separation of Chairman and CEO allowed; New rules on board's information; Board approval and disclosure requirements for nonroutine related-party transactions and some executive compensation; Annual ratification by shareholder meeting; Annual disclosure of individual directors' compensation — Board effectiveness; Internal governance; Shareholder empowerment; Disclosure - 2002: Lower thresholds for minority shareholder rights — Shareholder empowerment - 2003: Corporate governance report mandated; Corporate governance code mandated on a comply-or-explain basis; CEO abstains from proposals of auditors; Audit partner rotation, 6 years; Prohibition on nonaudit services to audit clients; Merger of securities and banking authorities; French "PCAOB" — Corporate governance; Financial reporting and auditing; Public enforcement; Disclosure - 2005: Continued board approval and disclosure requirements for nonroutine transactions with significant shareholders and executive compensation — Internal governance and Disclosure - Source: Enriques and Volpin (2007). - EU-level reforms (selected entries and years) - 2001: Directive on the Admission of Securities to Official Stock Exchange Listings; Regulation on the Statute for a European Company; Directive supplementing the Statute for a European Company. - 2002: IAS/IFRS Regulation (+ 13 associated regulations). Requires EU companies listed in a European regulated market to prepare consolidated financial statements in accordance to International Financial Reporting Standards (IFRS) (implementation in 2006). - 2003: Market Abuse Directive (MAD) + 2 associated directives and 1 regulation — Bans insider trading and market manipulation; Directive on Disclosure Requirements; Prospectus Directive (PD) — Requires companies to disclose details of related-party transactions. - 2004: Takeover Bids Directive (TBD) — Focuses on: (i) mandatory bid rule; (ii) board neutrality rule; and (iii) break-through rule; Transparency Directive (TD) — Requires shareholders to promptly notify companies upon acquisitions or disposal of shares in relation to relevant thresholds of voting rights. - 2006: Directive on Statutory Audit — Strenthens public oversight and auditors' independence; Directive on Annual Accounts of Certain Types of Companies and Consolidated Accounts; Directive on Formation of Public Limited Liability Companies and the Maintenance and Alteration of Their Capital; Directive on the Exercise of Voting Rights. - Sources: Enriques and Gatti (2006); and European Commission. ### Voting premium data and empirical findings - Table 6. Voting Premium: Summary Statistics (Sample average,1992-2007) - Sample size and Voting premium Mean and Median by country: - Canada: 37,818 — 0.15 — 0.02 - Denmark: 24,384 — 0.13 — 0.01 - Finland: 21,227 — 0.13 — 0.03 - France: 2,653 — 0.50 — 0.20 - Germany: 52,038 — 0.11 — 0.09 - Italy: 63,204 — 0.46 — 0.31 - Norway: 11,699 — 0.04 — 0.02 - Sweden: 19,859 — 0.01 — 0.00 - UK: 17,928 — 0.31 — 0.19 - Overall: 250,810 — 0.21 — 0.06 - Table 5. Number of Dual-Class Firms by Country (1992–2007 period average) - Canada 49; Denmark 34; Finland 28; France 15; Germany 68; Italy 80; Norway 14; Sweden 32; UK 22; Total 342 - Source: DataStream - Note: Includes firms with shares satsfying conditions (a)-(e) in the text. - Table 7. Voting Premiums: Year Effects (fixed-effect estimations explaining the one-year lead in the voting premium with year dummies and country dummies, as in equation (2)) - Year dummy coefficients, Std. err., P>|t|: - yd93 -0.073 0.006 0.000 - yd94 -0.205 0.006 0.000 - yd95 -0.218 0.006 0.000 - yd96 -0.224 0.006 0.000 - yd97 -0.246 0.006 0.000 - yd98 -0.281 0.006 0.000 - yd99 -0.262 0.006 0.000 - yd00 -0.243 0.006 0.000 - yd01 -0.284 0.006 0.000 - yd02 -0.316 0.006 0.000 - yd03 -0.339 0.006 0.000 - yd04 -0.352 0.006 0.000 - yd05 -0.338 0.006 0.000 - yd06 -0.325 0.006 0.000 - yd07 -0.306 0.006 0.000 - _cons 0.469 0.005 0.000 - R within 0.288 - R2 between 0.008 - R2 overall 0.19 - Table 8. Voting Premiums: Distributed Year Effects (two- and three-year lead; only reform-heavy years shown) - VP, 2-year lead (Coef. Std. err. P>|t|): - yd98 -0.291 0.008 0.000 - yd01 -0.297 0.008 0.000 - yd02 -0.329 0.008 0.000 - yd03 -0.352 0.008 0.000 - yd04 -0.363 0.008 0.000 - yd05 -0.350 0.008 0.000 - yd06 -0.332 0.008 0.000 - _cons 0.476 0.006 0.000 - R within 0.018 - R2 between 0.192 - R2 overall 0.190 - VP, 3-year lead (same coefficients reported): - yd98 -0.291 0.008 0.000 - yd01 -0.297 0.008 0.000 - yd02 -0.328 0.008 0.000 - yd03 -0.351 0.008 0.000 - yd04 -0.363 0.008 0.000 - yd05 -0.350 0.008 0.000 - yd06 -0.332 0.008 0.000 - _cons 0.476 0.006 0.000 - R within 0.018 - R2 between 0.192 - R2 overall 0.190 - Table 9. Relative Effectiveness of Reforms in C3 Compared to the EU and Non-EU Peers, by Year (fixed-effect estimations with interaction dummies between country and year; EU control group includes Denmark, Finland, Sweden, and the UK; non-EU control group includes Canada and Norway) - 1998 - France 0.061 0.087 0.482 - Germany -0.018 0.009 0.041 - Italy -0.029 0.008 0.001 - Control group -0.006 - EU -0.039 0.015 0.181 - non-EU 0.008 0.020 0.692 - 2001 - France -0.203 0.050 0.000 - Germany -0.005 0.009 0.596 - Italy -0.171 0.008 0.000 - Control group -0.084 - EU 0.043 0.014 0.197 - non-EU 0.008 0.019 0.694 - 2002 - France -0.601 0.038 0.000 - Germany -0.041 0.009 0.000 - Italy -0.276 0.008 0.000 - Control group -0.220 - EU 0.038 0.014 0.179 - non-EU -0.028 0.019 0.140 - 2003 - France -0.519 0.034 0.000 - Germany -0.078 0.009 0.000 - Italy -0.324 0.008 0.000 - Control group -0.218 - EU 0.049 0.014 0.023 - non-EU -0.035 0.019 0.069 - 2004 - France -0.297 0.034 0.000 - Germany -0.074 0.009 0.000 - Italy -0.335 0.008 0.000 - Control group -0.165 - EU 0.045 0.014 0.096 - non-EU 0.002 0.019 0.919 - 2005 - France -0.096 0.032 0.003 - Germany -0.057 0.009 0.000 - Italy -0.310 0.008 0.000 - Control group -0.104 - EU 0.049 0.014 0.359 - non-EU 0.033 0.019 0.083 - 2006 - France 0.292 0.029 0.000 - Germany -0.037 0.009 0.000 - Italy -0.286 0.008 0.000 - Control group 0.001 - EU 0.037 0.014 0.305 - non-EU 0.110 0.019 0.000 - Table 10. Relative Effectiveness of Reforms Compared to Control Groups: A Summary - More effective than for the control group? (EU / non-EU) - 1998: Italy yes / yes; France no / no; Germany yes / yes - 2001–05: Italy yes, significantly / yes; France yes / yes; Germany yes / yes - 2006: Italy yes / yes; France no, wrong direction / yes, but wrong direction of the control; Germany yes / yes - Table 11. Voting Premiums: Year Effects, Accounting for Product Market Reforms (fixed-effect estimations with year dummies, country dummies, and the index of product market reforms (PMR)) - Selected year dummy coefficients, Std. err., P>|t|: - yd93 -0.005 0.006 0.392 - yd94 -0.094 0.006 0.000 - yd95 -0.035 0.007 0.000 - yd96 -0.002 0.007 0.804 - yd97 0.009 0.007 0.187 - yd98 0.004 0.007 0.635 - yd99 0.104 0.008 0.000 - yd00 0.174 0.009 0.000 - yd01 0.180 0.009 0.000 - yd02 0.211 0.010 0.000 - yd03 0.206 0.010 0.000 - PMR 0.238 0.004 0.000 - _cons -0.548 0.016 0.000 - R within 0.150 - R2 between 0.172 - R2 overall 0.173 - Table 12. Relative Effectiveness of Reforms in C3 Compared to the EU and Non-EU peers, Accounting for Product Market Reforms, by Year (PMR included) - 1998 - PMR 0.133 0.002 0.000 - France -0.023 0.087 0.793 - Germany -0.034 0.009 0.000 - Italy -0.202 0.008 0.000 - Control group - EU -0.019 0.014 0.356 - non-EU 0.013 0.019 0.488 - 2001 - PMR 0.131 0.002 0.000 - France 0.065 0.051 0.201 - Germany 0.094 0.009 0.000 - Italy -0.139 0.008 0.000 - Control group - EU 0.076 0.014 0.205 - non-EU 0.081 0.019 0.000 - 2002 - PMR 0.128 0.002 0.000 - France -0.050 0.042 0.240 - Germany 0.083 0.009 0.000 - Italy -0.180 0.009 0.000 - Control group - EU 0.092 0.014 0.000 - non-EU 0.071 0.019 0.000 - 2003 - PMR 0.127 0.002 0.000 - France -0.003 0.042 0.941 - Germany 0.057 0.009 0.000 - Italy -0.218 0.009 0.000 - Control group - EU 0.124 0.014 0.000 - non-EU 0.092 0.019 0.000 - Note: 2004–06 dropped due to collinearity. ### Distributional and time-series statistics for voting premiums - Table 13. Distribution Characteristics of Voting Premiums, Pooled for All EU Countries (Year / Mean / Std. err. / 95% Conf. Interval) - 1992 0.492 0.0125 0.468 0.517 - 1993 0.413 0.0109 0.392 0.434 - 1994 0.276 0.0063 0.263 0.288 - 1995 0.260 0.0054 0.250 0.271 - 1996 0.246 0.0051 0.237 0.256 - 1997 0.224 0.0045 0.215 0.232 - 1998 0.184 0.0039 0.177 0.192 - 1999 0.201 0.0039 0.193 0.209 - 2000 0.220 0.0042 0.212 0.229 - 2001 0.176 0.0040 0.168 0.184 - 2002 0.144 0.0045 0.135 0.152 - 2003 0.121 0.0041 0.113 0.129 - 2004 0.108 0.0038 0.100 0.115 - 2005 0.121 0.0040 0.113 0.129 - 2006 0.138 0.0045 0.129 0.147 - 2007 0.180 0.0064 0.168 0.193 - Figures and dynamics (captions and description) - Figure 1. Dynamics of the Voting Premiums Across Countries, 1992–2007 (Annual averages). Countries shown: Italy, France, Germany, EU, non-EU. Sources: DataStream; and IMF staff calculations. - Figure 2. Reform Efforts: Number of Important Corporate Governance Reforms Per Year. Source: Enrique and Volpin (2007). Country panels shown for Italy, France, Germany, EU with year ranges 1992–2007. - Figure 3. Number of National and EU Corporate Governance Reforms 1/ (graphical count series). - Figure 4. Convergence in Voting Premiums Across Countries (Standard deviation of country voting premiums). Time axis 1992–2007; Standard deviation (left axis). - Figure 5. Distribution of Voting Premiums Across EU Countries, by Year (density plots, years 1992–2008). *Source: _wp0891 - References* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2008/_wp0891.pdf_