Abstract

In the last decade, the historical problems of the Italian stock market have been confirmed, and even worsened. Looking at the number of listed companies, capitalisation and overall performance, Italy lags behind countries with a bank-oriented financial system such as France, Germany or Spain. This paper reviews the IPOS of the last decade and confirms the problems shown by previous research, particularly the shareholders' objective to keep absolute control and maximise the issue price. The underlying hypothesis is that the price-formation process is biased towards the selling side, because discretionality and inadequate transparency dwarf the countervailing power on the investors' side. As a consequence the underpricing (i.e. positive returns in the first day of flotation) is reduced and there is a high probability of negative 3-month returns both in absolute terms and relative to the market index. Three representative cases show the main weaknesses of the Italian companies towards the flotation process. The policy implication is that the practices spontaneously worked out by market participants must be revised, to limit discretional choices on the offer side and increase transparency in the bookbuilding process.