Loyalty shares in Italy: empirical evidence of the influence of board characteristics on short-termism reduction

Loyalty shares are a control-enhancing mechanism granting rewards to shareholders who hold them for a specified period of time, the effects of the issuance of such instruments have still not been widely analyzed by scholars. The focus of this thesis is on Italy, one of the countries with a specific legislation concerning loyalty shares since 2014. In particular, this thesis is based on the findings consistent with an “antidote view” of loyalty shares presented in the study of Mio et al. (2020). Antidote view supports the fact that loyalty shares have the potential to reduce earnings management, this assumes that a possible driver of short-termism (as measured by earnings management) is shareholder preference. The main contribution of this thesis is to influence some selected board characteristics (independence, gender diversity, tenure and CEO narcissism) as moderating variables in the relation between loyalty shares and short termism. Thus, wondering whether short termism is influenced by boards (or by shareholder preferences through boards). The methodology follows the empirical approach used by Mio et al. (2020) and includes the employment of statistical techniques such as difference-in-differences methodology and regressions. Further insights into the functioning of loyalty shares as a short termism antidote could be provided by understanding whether the board of directors plays a key role or the most influent driver of long termism are the shareholders.