Papers by Valerio Novembre
RePEc: Research Papers in Economics, 2014
The corporate governance of Italian listed companies showed significant changes in the last fifte... more The corporate governance of Italian listed companies showed significant changes in the last fifteen years under the impulse of self-regulation initiatives, legislative innovations and market discipline. The market pressure together with the increasing dissemination of selfregulation good practices will increase the quality of corporate governance and create the basis for the application of more flexible rules
SSRN Electronic Journal, 2014
We wish to thank Massimo Belcredi for very helpful comments on a previous draft, though the respo... more We wish to thank Massimo Belcredi for very helpful comments on a previous draft, though the responsibility for any mistakes and for the opinions expressed remains our own. The ideas and positions in the paper are personal views of the authors and cannot be attributable to Consob.
Social Science Research Network, 2010
As a consequence of the fi nancial crisis, the effectiveness of self-regulation has been increasi... more As a consequence of the fi nancial crisis, the effectiveness of self-regulation has been increasingly questioned. In particular, self-regulatory initiatives on corporate governance have been often put under scrutiny so as to assess whether, by favouring the actual adoption of best practices, these codes are really effective in prompting better governance. Looking at one of the most important features of the Code, this paper tries to address this issue by building up an indicator (so-called CoRe) that assesses the actual level of compliance for Italian listed companies. We fi nd that actual compliance, as measured by the CoRe indicator, is much lower than formal compliance, as declared by issuers. A second fi nding is that actual compliance is driven by some key aspects of fi rms' governance. The CoRe indicator is systematically higher in fi rms in which: i) minority shareholders have appointed one or more directors; ii) independent directors are organized in a committee; iii) institutional investors, especially if foreign, participate to GMs; iv) normative control enhancing mechanisms are adopted, v) there is no separation between ownership and control by means of pyramids.
The corporate governance of Italian listed companies showed significant changes in the last fifte... more The corporate governance of Italian listed companies showed significant changes in the last fifteen years under the impulse of self-regulation initiatives, legislative innovations and market discipline. The market pressure together with the increasing dissemination of selfregulation good practices will increase the quality of corporate governance and create the basis for the application of more flexible rules
The aim of the thesis is to analyze the implementation process of Basel II so to understand wheth... more The aim of the thesis is to analyze the implementation process of Basel II so to understand whether and to what extent national discrepancies might cause problems of competitive neutrality and thus invalidate the significant level of harmonization in capital adequacy regulation which was successfully achieved by Basel I. To achieve this result, this work looks at three different issues. The first paper looks at the negotiation process of an international soft law agreement and tries to understand whether it is able to explain its implementation results in terms of the actual degree of compliance across different countries. A game theory coordination model is suggested as a theoretical answer to this question, while the two Basel Accord cases are used to test the model empirically. The appreciation of the circumstances that led to the two Accords is proved as indicative of the reasons behind the widespread adoption of the Basel I Accord as opposed to the piecemeal implementation of B...
Institutional investors are often criticized for their insufficient “engagement” with listed comp... more Institutional investors are often criticized for their insufficient “engagement” with listed companies. Actually, information and other transaction costs limit their capacity to actively monitor investee firms, and to engage with their management. A partial solution is offered by Proxy Advisors (PAs), providing proxy voting services on a subscription basis. We use Say-On-Pay (SOP) in Italian listed firms to investigate PA activity and (institutional) shareholder voting behavior. Making use of a unique dataset, including information on how each shareholder voted in 2012, we analyze the behavior of different classes of shareholders and their relation with PA recommendations. Our main results can be summarized as follows: i) while shareholder dissent on SOP is low, in line with what happens in other developed countries, dissent by institutional investors is surprisingly high; ii) the voting behavior of institutional investors is strongly correlated with PA recommendations. The influenc...
In the paper we document the evolution of Italian listed companies governance since 1990 under tw... more In the paper we document the evolution of Italian listed companies governance since 1990 under two respects: a) their governance structure and b) some measures of good governance, in order to verify whether some changes are detectable as a consequence of a vast reform process that has taken place over the last 15 years. We find that regarding governance structure, significant changes have taken places firstly with respect to control enhancing mechanisms used by companies: whereas at the beginning of the 90s pyramids, dual class shares and cross-ownership were the most used, in 2007 their importance has substantially reduced with an increase in another control mechanism, the coalitions among shareholders; secondly with reference to a substantially higher presence of institutional investors, mainly foreign. As good governance is concerned, we observe a reduced value of the proxies for control premium, a greater compliance with corporate governance codes, an increased presence of institutional investors at annual shareholders' meetings. However, on the one hand in some cases compliance with codes is still more formal than substantial, on the other foreign institutional investors still participate in Italian shareholders' meetings with a lower frequency than in other countries. The implementation of the shareholders' rights directive (due within 2009) and the introduction of a stricter discipline of related party transactions (to be issued by Consob) might benefit especially the second aspect.
Corporate Ownership and Control
Where corporate ownership is concentrated, the incentives for institutional shareholders to engag... more Where corporate ownership is concentrated, the incentives for institutional shareholders to engage with firms in their portfolio are not clear a priori. Making use of a unique dataset of Say-on-Pay (SOP) votes in Italian listed firms, we provide evidence that specific classes of institutional investors do actively monitor investee firms under concentrated ownership, and that Proxy Advisors (PAs) perform an informational role: i) while general shareholder dissent on SOP is low, dissent by mutual and pension funds holding small equity positions (nonblockholders) is high; ii) nonblockholders’ dissent is negatively correlated with ownership concentration, suggesting that they tend to trust control shareholders to act as delegated monitors on managerial remuneration; iii) voting by institutional investors is strongly correlated with PA recommendations; iv) institutional investors do not follow PA recommendations blindly but look at specific reasons of concern expressed in PA reports. Our...
New Issues in Financial Institutions Management, 2010
Bank Strategy, Governance and Ratings, 2011
SSRN Electronic Journal, 2000
Journal of Applied Corporate Finance
Nearly 86% of listed Italian companies now claim to be in formal compliance with the provisions o... more Nearly 86% of listed Italian companies now claim to be in formal compliance with the provisions of the Italian Corporate Governance Code, which, like many codes in EU countries, give companies the option to either comply or explain their decision not to do so. But in the wake of the recent financial crisis, the effectiveness of such self-regulatory corporate governance codes has been subjected to increasing skepticism. In particular, critics wonder whether such governance codes actually encourage the adoption of best practices and promote better governance.This article presents a governance indicator (CoRe) devised by the authors that attempts to assess the actual, or effective, levels of compliance with the Italian Corporate Governance Code in terms of listed companies' procedures for dealing with related party transactions (RPTs). The authors report that the companies' level of effective compliance with regard to RPTs is considerably lower than their publicly reported levels of formal compliance. The authors also report that higher levels of effective compliance tend to be found in companies where (1) minority shareholders have appointed one or more directors; (2) independent directors serve on important committees; and (3) there are significant holdings by institutional investors—particularly foreign investors—who participate in general shareholder meetings.
Journal of Applied Corporate Finance, 2011
Journal of Banking Regulation, 2009
Credit rating agencies (CRAs) play an important role in global secu-rities and banking markets, a... more Credit rating agencies (CRAs) play an important role in global secu-rities and banking markets, as their credit ratings are used by investors, borrowers, issuers and governments as part of making informed investment and financing decisions. Credit institutions, investment firms, insurance undertakings, reinsurance undertak-ings, undertakings for collective investment in transferable securities (UCITS) and institutions for occupational retirement provision may use those credit ratings as the reference for the calculation of their capital requirements for solvency purposes or for calculating risks in their investment activity. However, their function has been increas-ingly questioned in recent years, especially with regard to the role credit ratings for structured finance have played in prompting the crisis. Many observers have argued that CRAs hold key responsi-bility for the crisis. In particular, they have been accused of oligopolistic behaviour, and of reacting slowly when downgra...
SSRN Electronic Journal, 2000
We investigate say-on-pay (SOP) voting outcomes in a country (Italy) where ownership structure is... more We investigate say-on-pay (SOP) voting outcomes in a country (Italy) where ownership structure is concentrated by regressing shareholder dissent on a comprehensive set of independent variables (spanning from remuneration structure and disclosure to corporate governance), coming from the Italian securities and exchange commission (CONSOB) and the listed companies' industry association (Assonime-Emittenti Titoli) databases. Our main results may be summarized as follows: a) shareholder dissent in Italy is smaller, but still comparable with that found in the UK and the US, where ownership is disperse; b) dissent is negatively correlated with the equity stake held by the largest shareholder; we interpret this evidence as consistent with better monitoring and lower agency costs; c) dissent is, at best, only weakly related with company performance; however, it is positively correlated with CEO remuneration and negatively correlated with the level of disclosure, especially on the variable components of CEO pay; d) dissent is affected by investor activism at the company level, as proxied by the turnout of institutional investors at the AGM and by minority directors (a peculiar feature of Italian CG regulation) sitting on the board of target companies; e) finally, dissent is higher where shareholders' SOP vote is non-binding, suggesting that the non-binding nature of the SOP vote may not reduce its effectiveness. JEL Classifications: G34, G38, J33, K22, M52..
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Papers by Valerio Novembre