Bolstering Family Control: Evidence from Loyalty Shares

Bolstering Family Control: Evidence from Loyalty Shares

Emanuele Bajo, Massimiliano Barbi, Marco Bigelli, Ettore Croci

Series number :

Serial Number: 

Date posted :

August 05 2019

Last revised :

April 30 2020
SSRN Share


  • loyalty shares • 
  • family firms • 
  • long-term shareholders • 
  • Control-enhancing mechanisms

We study the introduction of a new control-enhancing mechanism in Italy, a country characterized by family-controlled firms and growing shareholders’ protection by institutional investors. Since 2014, Italian firms have been able to adopt loyalty shares, which allow a double voting right if shares are continuously held for at least two years.

We find that about 20 percent of listed firms have introduced loyalty shares, and family-controlled firms are the most likely adopters. Loyalty shares neither anticipate acquisitions, nor equity issues by the adopting firm. Instead, they allow controlling shareholders to reduce their
equity stake without losing control. We report no evidence of an adverse wealth effect both at the adoption and in the years following it. Institutional investors oppose the introduction of loyalty shares, yet they do not reduce their holdings in adopting firms. Overall, our evidence suggests that bolstering family control is the main effect of the introduction of loyalty shares.


Real name:
Emanuele Bajo
Real name:
Massimiliano Barbi
Real name:
Marco Bigelli
University of Bologna
Real name:
Ettore Croci
Università Cattolica del Sacro Cuore Milan