Institutional Investor Activism in a Context of Concentrated Ownership and High Private Benefits of Control: the Case of Italy

Active investors may alternatively seek to become part of a control coalition to share in private benefits extraction or take an adversarial stance, aimed at monitoring the control shareholder, especially where the latter does not hold a majority stake. We have analyzed institutional activism in Italy, a country with concentrated ownership and a reputation for high private benefits of control and weak investor protection. Our strong impression is that corporate governance reforms implemented over the last twenty years have considerably strengthened investor protection, thereby increasing the scope for value-enhancing activism and curbing opportunities for ‘dark side’ relational investing. Enforcement remains crucial in this regard. Albeit anecdotal, our evidence is overall consistent with improved monitoring and investor protection.