Pyramidal structures, voting trusts and performance: empirical evidence from Italian listed companies

The paper explores the antecedents and the impact of pyramidal structures and voting trusts in Italian S&P/MIB 40 companies. Literature suggests that these “control enhancing mechanisms” allow the deviation from the proportionality principle, and predicts that they affect company performance. The study sheds some light on this relationship and documents the misalignment between economic and market outcomes in the companies under investigation. In particular, the findings show that pyramidal structures and voting trusts are common when the firm’s economic result is high. However, companies ruled by these control enhancing mechanisms present a limited market performance. The research has both theoretical implications for future studies, and practical implications for policy makers. First, it illustrates that the company performance is both driven and affected by control enhancing mechanisms. Second, it suggests that proper and effective investor protection is an important tool to support the corporate governance quality, to foster new company listings and to promote equitable treatment for minority shareholders.