Luigi Vena

The relative merit of the corporate versus the cooperative form as the optimal ownership structure for a firm remains a contentious point. We assess the effectiveness of these two alternatives by leveraging on a natural experiment provided by the Italian 2015 reform mandating the largest cooperative banks to switch to a corporate form. An event study reveals that on the news of the reform the value of equity and of debt with different seniority increased or was flat, proving the Pareto efficiency of the corporate form for all financial claimholders. A compression of the risk profiles of the banks' financial claims contributed to this positive value effect, which negates the long-held belief of demutualization as a possible cause of an asset substitution risk. In spite of its Pareto efficiency, demutualization did not emerge endogenously as the most efficient contracting solution among firm's stakeholders, which makes the case for regulators playing an active role in a demutualization process without fears motivated by stability concerns. 1 We thank all the participants to the ADEIMF 2021 Conference and Stefano Dell'Atti (our discussant) for their more than valuable suggestions. We are also grateful to Fausto Panunzi and Stefano Bonini for providing insightful comments. As usual, any remaining errors are our exclusive responsibility. ‡