When Controlling Shareholders Live Like Kings. The Case of Telecom Italia

56 Pages Posted: 17 Feb 2006

See all articles by Michele Meoli

Michele Meoli

University of Bergamo

Stefano Paleari

University of Bergamo - SIGE Sezione di Ingegneria Gestionale

Giovanni Urga

Centre for Econometric Analysis, Faculty of Finance, Bayes Business School (formerly Cass), London, UK

Date Written: January 24, 2006

Abstract

The evolution of the control of Telecom Italia, the sixth largest telecommunication company in the world by turnover, is an exemplary textbook case for studying minority expropriation. Our study consists of three parts. First we analyse how Olivetti's and Pirelli's acquisitions of Telecom Italia were achieved and, in particular, who paid for the acquisition of control by tracing down all operations performed in the market. Second, we provide evidence that, in the case of Telecom Italia, the implementation of pyramids is connected with the existence of large private benefits, measured both by the size of premium paid for the acquisition and by the voting premium. Third, we investigate how minorities are affected by the pyramidal control. Our analysis reveals that despite the introduction of the Draghi reform in 1998, aimed to strengthen investors' and minorities' rights, minority protection law is still inadequate in the Italian financial market. The case of Telecom Italia shows how, despite recent regulations, a controlling shareholder can still "live like a king".

Keywords: Ownership structure, Minority protection, Wealth transfer, Business Groups, Voting premium

JEL Classification: G32, G34

Suggested Citation

Meoli, Michele and Paleari, Stefano and Urga, Giovanni, When Controlling Shareholders Live Like Kings. The Case of Telecom Italia (January 24, 2006). Available at SSRN: https://ssrn.com/abstract=883655 or http://dx.doi.org/10.2139/ssrn.883655

Michele Meoli (Contact Author)

University of Bergamo ( email )

Via Marconi 5
24044 Dalmine, Bergamo
Italy
+390352052026 (Phone)
+390352052077 (Fax)

Stefano Paleari

University of Bergamo - SIGE Sezione di Ingegneria Gestionale ( email )

Via Marconi 5
24044 Dalmine, Bergamo
Italy
+39 03 520 52340 (Phone)
+39 03 556 2779 (Fax)

Giovanni Urga

Centre for Econometric Analysis, Faculty of Finance, Bayes Business School (formerly Cass), London, UK ( email )

108 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 20 7040 8698 (Phone)
+44 20 7040 8881 (Fax)

HOME PAGE: http://www.bayes.city.ac.uk/faculties-and-research/experts/giovanni-urga

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