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The Market Value of Corporate Votes: Theory and Evidence from Option PricesAvner KalayTel Aviv University - Faculty of Management; University of Utah - David Eccles School of Business Oguzhan KarakasBoston College - Department of Finance Shagun PantUniversity of Iowa - Department of Finance April 20, 2012 Journal of Finance, Forthcoming Abstract: This paper proposes a new method using option prices to estimate the market value of the voting right associated with a stock. The method consists of synthesizing a non-voting share using put-call parity, and comparing its price to that of the underlying stock. Empirically, we find this measure of the value of the vote to be positive and increasing in the time to expiration of synthetic stocks. The measure also increases around special shareholder meetings, periods of hedge fund activism and M&A events. The method is likely useful in studies of corporate control and also has asset pricing implications.
Number of Pages in PDF File: 68 Keywords: Voting Rights, Put-Call Parity, Options, Shareholder Meetings, Hedge Funds, Activism, Mergers & Acquisitions JEL Classification: G13, G34 Accepted Paper SeriesDate posted: January 26, 2011 ; Last revised: April 28, 2013Suggested CitationContact Information
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