At the end of the nineteen century, Italy was still lagging behind in the industrial process compared to other European nations. One of the reasons for this slow industrial process was the lack of available capital at this important time in Italy's history. A direct result of this economic problem was the established of two banks,Banco Commerciale Italinna and Creditio Italinna,these banks were backed by German capital and management skills. From 1896 to 1914 Italy had intense industrial activity in the country. The banks provided the much needed capital and expertise and skills which resulted in the establishment of many companies like Breda(train engines) and Fiat(cars). The industrialization process became so big the banks were unable to keep up with this intense process. In 1887 government intervention was needed to rescue a large steel company(Teri) and its lenders from bankruptcy. This was the start of state involement in large companies in Italy. The credit depression forced the government to intervene on a much larger scale. The financial crisis led to the collapse of Italy's three main investment banks. With the state now financially involved with all these rescued companies they established an agency called (LRI) to manage the large portfolio of companies previously controlled by the three banks. Italy has still maintained a direct precence in the economy as the controlling shareholder of profit oriented firms. The state now became more actively involved in investing in sounds companies as well as troubled companies . This even bigger portfolio of companies resulted in a second agency being created called (ENI). The companies acquired by the state where run as profit organisations but could rely on state financial assistance from the treasury if required. These acquired companies contributed to growth in the economy during the 1960s and 1970s,but over time they became a burden on the economy due to inefficient production technolgies and misallocation of resources. The government had massive public debt in the early nineties and was forced by Europe to engage in a sweeping privatisation programme.
Market competition also changed post joining of E.E.C. Before membership large companies enjoyed unlimited market power until anti-trust legislation was introduced in 1991. Most family business whose companies traded on the stock market financed their expansion of their empires with large profits achieved from monopolistic rents in their core sector. After government direct intervention international competition followed a non monotonic pattern and saw a trend of increasing market integration across other European economies. The legal and regulatory environment also saw some considerable changes. Table below list some major regulatory events affecting traded companies and financial markets.
Stock - Exchange. * April 1974 -Creation of CONSOB ,agency in charge of the supervision over the stock markets. * march 1975-Definitions of CONSOBS powers. * May 1991-Insider trading laws. * Nov.1991 -Regulation of disclosure requirements by companies offering securites to the public * Feb.1992 Takeover law mandatory bid rule.
The above list the most important regulatory acts affecting investor protection in Italy.
In 1975,the government imposed external auditing of the balances of traded companies as a requirement and also introduced new accounting rules for the financial statements of financial companies, banks and insurance companies. Since 1974 the acquisition of more than 2% of the voting rights of traded companies must be reported to CONSOB within 48 hours. The 1990s proved a period of key intense legislation, largely due to the European community's pressure to harmonise stock markets market regulation within Europe. Even with intense important improvements, in 1994 Italy still ranked among the lowest of the industrial countries in legal protection for investors among the industrialised countries.(LA Porta etal.1998).

Bibliography

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