Another 'Option' for Determining the Value of Corporate Votes
Boston College - Department of Finance
This paper proposes a new approach of inferring the value of voting rights attached to a stock by using options. This method might help solve the problems present in previous studies on the value of control such as endogeneity and data availability. The paper also has implications for option pricing literature. It provides a rational explanation for some of the widely documented violations of put-call parity. Using a sample of 80 US public companies intervened by activist hedge funds from 2002 to the first half of 2006 and their industry- and size-matched firms, I find that the average percentage and probability of lower-bound put-call parity violations are higher for the companies after they are attacked by hedge funds, which is consistent with the predictions of the model.
Number of Pages in PDF File: 34
Keywords: Options, Voting Rights, Put-Call Parity
JEL Classification: G13, G34working papers series
Date posted: March 18, 2008
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