More is less? Wealth effects of Italian stocks to the increase in allowed voting rights

To address the steadily declining numbers of listed companies, several European countries are going to allow the issuance of dual class shares. However, there is skepticism among corporate governance experts whether this is an attractive option to increase the number of IPOs. To evaluate this new rule, the Italian stock market offers a unique natural experiment. We investigate the wealth effect for Italian shareholders to the announcement of this increase in allowed voting rights. Our results show significant negative abnormal returns for firms with dual class shares, thus indicating an aversion of investors towards an asymmetrical distribution of voting rights.