The value of voting rights in Italian cooperative banks : a quasi-natural experiment

Purpose: It is widely believed that deviating from the “one share-one vote” principle leads to corporate inefficiencies. To measure the market appraisal of this potential inefficiency, this study aims to analyse the market reaction to a change from the “one head-one vote” to the “one share-one vote” mechanism by means of a quasi-natural experiment: a 2015 Italian reform forcing all listed cooperative banks to transform into joint-stock companies. Design/methodology/approach: To investigate the market reaction around the regulatory change, this study uses both a traditional event study and a novel methodology based on the synthetic control method as well as on Bayesian statistical techniques. Findings: This study estimates the market valuation of the effects of the governance change around the event date being equal to a cumulative average increase in market value of about 14 per cent using an event study methodology, and of about 13 per cent using Bayesian techniques. Originality/value: This study provides evidence on the fact that the voting mechanism significantly affects the market values of companies. The study also introduces a novel statistical technique that can be extremely useful in analysing single-firm event studies.