The Corporate governance literature affirms that Corporate governance is one of the important factors influencing performance (Morck et al., 1988, Emmons and Schmid, 1999, Gompers et al. 2001, Severin, 2001, Drobetz et al., 2004, Klapper and Love, 2004, Brown and Caylor, 2006, Bistrova and Lace, 2011, Walls et al., 2012). There are many different features describing corporate governance system, in each Country. Differences regard, mainly, stage of economic development, country’s legal tradition (common or civil law), development of stock market, capital and ownership structure and business practices. In Italy, the corporate governance system has two typical characteristics: - the first concerns the combination of two fundamental aspects of governance such as the shareholding structure and the degree of stability of the structure; - the second concerns the legislative model of governance adopted by the company. Regarding the analysis of the governance model, the Italian company is strongly characterized by centralized and unitary ownership (in the figure of the entrepreneur) and by stability of this. In terms of ownership concentration, the average share of the largest shareholder at 67%, the average share of the top three shareholders is 92%, the median number of shareholders is 3 (Bianchi et al., 2006). In Italy there are particular types of companies called family businesses or “companies in which one or more families, linked by kinship or allied, holding a share of the capital likely to exercise control" (Montemerlo, 2000). The family business is a type of company spread around the world but it’s the most common form in the reality of Italian companies, a study shows that 85% of Italian companies is family businesses (Ravasi and Zattoni, 2000). Among the factors that may explain, in part, the prevalence of family-type businesses in Italy, we find in particular: - a concentration of financial resources in the hands of a few families; - the ability to use instruments such as shares without voting rights; - the ability to create "networks" of share connections between large business families. (De Mattè and Corbetta, 1993). Among the models of governance introduced in Italy in 2003 alongside the traditional model there are two additional governance models (monistic and dual systems). The traditional model is, nevertheless, still the favorite and the most adopted by Italian companies. This system provides an management organ, appointed by the shareholders meeting, said “board of directors” and a control organ as defined in the board of statutory advisors, also appointed by the shareholders. This model is the best to split the function of control from that of management, control that is both legality and merit control. In the two-tier model control is performed by the “supervisory board” while in the one-tier model by the “management control committee”, no organ is in charge of the legality review. It therefore seems that the traditional model ensures greater control and give more representation to owners who are required to elect both the members of the management body (Board of Directors) and those of control organ (board of statutory advisors). In this study, in order to analyze the typical characteristics of corporate governance in Italian companies we used the Corporate Governance Rating (CGR). The CGR reflects how an organization accepts and follows laws and guidelines of corporate governance practices and policies. In our study we show, firstly, the steps for building the Italian CGR model by identifying and defining all the variables considered important in the assessment of corporate governance. We believe that our rating model draws greater attention to the important features peculiar to the Italian governance system than other models. Within the CGR model parameters, in fact, we can observe information on peculiar control organs of the traditional model of governance (not found in other scoring systems), more information on the transparency and on the protection of minority rights as set forth in the Code of Conduct for Italian listed companies. Main objective, in our analysis, of applying our CGR model is to test the major capacity of this model to highlight the Italian corporate governance features. In a second step we analyzed, also, the relationship between governance and performance. This analysis is to determine whether the Italian family business, better represented by the new scoring model, develops a better governance which is able to produce better performance. For these reasons we will test this relationship and the peculiarity of Italian corporate governance responding to the following hypothesis: 1. good governance affects good performance; 2. family firms have a better governance. In order to prove what above, the study continue with a multi case studies analysis in which we analyze, firstly, the good governance, through the CGR model, in a random sample of Italian family and non family firms and then the relationship between governance and performance.
CGR Model to explore relatinship between governance and performance in family and non family businesses
VALLONE, CINZIA
2013-01-01
Abstract
The Corporate governance literature affirms that Corporate governance is one of the important factors influencing performance (Morck et al., 1988, Emmons and Schmid, 1999, Gompers et al. 2001, Severin, 2001, Drobetz et al., 2004, Klapper and Love, 2004, Brown and Caylor, 2006, Bistrova and Lace, 2011, Walls et al., 2012). There are many different features describing corporate governance system, in each Country. Differences regard, mainly, stage of economic development, country’s legal tradition (common or civil law), development of stock market, capital and ownership structure and business practices. In Italy, the corporate governance system has two typical characteristics: - the first concerns the combination of two fundamental aspects of governance such as the shareholding structure and the degree of stability of the structure; - the second concerns the legislative model of governance adopted by the company. Regarding the analysis of the governance model, the Italian company is strongly characterized by centralized and unitary ownership (in the figure of the entrepreneur) and by stability of this. In terms of ownership concentration, the average share of the largest shareholder at 67%, the average share of the top three shareholders is 92%, the median number of shareholders is 3 (Bianchi et al., 2006). In Italy there are particular types of companies called family businesses or “companies in which one or more families, linked by kinship or allied, holding a share of the capital likely to exercise control" (Montemerlo, 2000). The family business is a type of company spread around the world but it’s the most common form in the reality of Italian companies, a study shows that 85% of Italian companies is family businesses (Ravasi and Zattoni, 2000). Among the factors that may explain, in part, the prevalence of family-type businesses in Italy, we find in particular: - a concentration of financial resources in the hands of a few families; - the ability to use instruments such as shares without voting rights; - the ability to create "networks" of share connections between large business families. (De Mattè and Corbetta, 1993). Among the models of governance introduced in Italy in 2003 alongside the traditional model there are two additional governance models (monistic and dual systems). The traditional model is, nevertheless, still the favorite and the most adopted by Italian companies. This system provides an management organ, appointed by the shareholders meeting, said “board of directors” and a control organ as defined in the board of statutory advisors, also appointed by the shareholders. This model is the best to split the function of control from that of management, control that is both legality and merit control. In the two-tier model control is performed by the “supervisory board” while in the one-tier model by the “management control committee”, no organ is in charge of the legality review. It therefore seems that the traditional model ensures greater control and give more representation to owners who are required to elect both the members of the management body (Board of Directors) and those of control organ (board of statutory advisors). In this study, in order to analyze the typical characteristics of corporate governance in Italian companies we used the Corporate Governance Rating (CGR). The CGR reflects how an organization accepts and follows laws and guidelines of corporate governance practices and policies. In our study we show, firstly, the steps for building the Italian CGR model by identifying and defining all the variables considered important in the assessment of corporate governance. We believe that our rating model draws greater attention to the important features peculiar to the Italian governance system than other models. Within the CGR model parameters, in fact, we can observe information on peculiar control organs of the traditional model of governance (not found in other scoring systems), more information on the transparency and on the protection of minority rights as set forth in the Code of Conduct for Italian listed companies. Main objective, in our analysis, of applying our CGR model is to test the major capacity of this model to highlight the Italian corporate governance features. In a second step we analyzed, also, the relationship between governance and performance. This analysis is to determine whether the Italian family business, better represented by the new scoring model, develops a better governance which is able to produce better performance. For these reasons we will test this relationship and the peculiarity of Italian corporate governance responding to the following hypothesis: 1. good governance affects good performance; 2. family firms have a better governance. In order to prove what above, the study continue with a multi case studies analysis in which we analyze, firstly, the good governance, through the CGR model, in a random sample of Italian family and non family firms and then the relationship between governance and performance.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
