Launched in April 2001, the Italian Stock Exchange (Borsa Italiana) STAR segment now includes 70 companies, including 4 banks, 1 Insurance company, 40 companies belonging to diverse industrial sectors of the Italian economy (from food to fashion, mechanical engineering, etc.) and more than 20 high-tech companies. In addition, starting in January 2005, three new representative indices were introduced to facilitate investor activity: STAR, TechSTAR and All-Stars (all shares). Borsa Italiana's first aim was to increase small and mid-cap (S&M) companies' visibility by addressing the most sensitive issues concerning S&M caps in order to facilitate investment decisions by institutional and retail investors.
STAR is a segment of the Italian MTA market dedicated to small and medium cap companies, with a maximum market capital of ¢â€š¬800m (¢â€š¬1,000m as from July 2005).
Entrance to the STAR segment is dis
cretionary, but implies a clear commitment to more stringent requirements of corporate governance, transparency and liquidity. Corporate governance requirements are stricter then in other segments. Companies commit themselves:
- to report quarterly results within 45 days form the end of the quarter;
- to appoint an Investors Relations Manager;
- to publish all information both in Italian and English and to make it available on their websites;
- to have a minimum number of independent directors;
- to have an internal audit committee set up with a majority of independent directors; and
- to have a performance-related top management remuneration.
The results suggest that STAR has outperformed non-STAR companies since its launch, both in terms of price performance and liquidity.
Over the last three years, STAR has outperformed the remaining MTA-traded companies by 26%. Moreover, STAR companies experienced an impressive increase in liquidity: in the first four months of 2005, the STAR's average daily turnover was higher than the remaining non-STAR mid & small caps by some 300%.
STAR's companies experienced a rise in the percentage of the number of independent directors, a greater presence of foreign investors, benefited from wider research published by brokers and resulted in a dramatic change in providing information to the public.
Even though smaller companies are less structured in terms of corporate governance than large caps, they have more flexibility and are more rapid in complying with higher standards.
For private, family owned companies seeking an IPO, the restructuring process can be disruptive and difficult. In such cases, proper advice and assistance can be useful to speed up the process. Borsa Italiana, as a key player in the development of the Italian financial markets, provides information and support to private companies approaching an initial offering.
Although it is not possible to define a “common" set of problems issuers face during the listing process, as far as corporate governance is concerned there are issues considered to be of greater complexity:
1. Family owned companies tend to underestimate the importance of good corporate governance. However, it takes only a few weeks to understand the importance of adopting best practice principles on governance to satisfy investors.
2. The question of the independence of non-executive directors can be understood differently by the different parties -regulators, advisors and shareholders and can lead to misunderstandings. Consequently, the “independence profile" for such directors must comply with the requirements set by Borsa Italiana.
3. For smaller companies, publishing the quarterly report within 45 days can require new staff to properly manage the accounting procedures that comply with STAR reporting standards.
At the time of the IPO, Borsa Italiana admits issuers to listing according to its general listing rules.
In order to obtain STAR status, issuers must submit a specific application. After the quotation, in order to maintain the STAR status, listed companies must comply with various requirements regarding corporate governance, liquidity and transparency. Every six months, Borsa Italiana evaluates compliance with these requirements by performing a comprehensive review using an advanced high-tech integrated information platform.
Borsa Italiana is committed to promoting STAR companies all over the world. Since its launch in 2001, Borsa Italiana has organized road shows in Milan, London, New York and all of the major European financial centres.
Roundtables and conferences are essential and are an effective way to disseminate the corporate governance culture. The ICC Istanbul Roundtable was of great interest, given the broad presence of international panellists, top-level representatives from private companies, government bodies and prestigious institutions.
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