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.