Are loyalty shares an effective antidote against short-termism? Empirical evidence from Italy

Corporate short-termism is arguably one of the main causes of economic, social, and environmental unsustainability. This paper studies the effectiveness of loyalty shares—shares granting extra dividends or voting rights to shareholders holding them for a specified period of time—in limiting short-termism. Although there are arguments both supporting (antidote view) and opposing (poison view) loyalty shares' effectiveness, empirical evidence on the theme is scant. By employing earnings management as a proxy for corporate short-termism and by relying on a hand-collected database of Italian firms, we find that loyalty shares can serve as an effective antidote against short-termism. This study contributes to academic literature on corporate governance and accounting and informs the debate among policymakers on loyalty shares' effectiveness.