Abstract

http://ssrn.com/abstract=1747952
 
 

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The Market Value of Corporate Votes: Theory and Evidence from Option Prices


Avner Kalay


Tel Aviv University - Faculty of Management; University of Utah - David Eccles School of Business

Oğuzhan Karakaş


Boston College - Department of Finance

Shagun Pant


University 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 Series





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Date posted: January 26, 2011 ; Last revised: April 28, 2013

Suggested Citation

Kalay, Avner and Karakaş, Oğuzhan and Pant, Shagun, The Market Value of Corporate Votes: Theory and Evidence from Option Prices (April 20, 2012). Journal of Finance, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1747952 or http://dx.doi.org/10.2139/ssrn.1747952

Contact Information

Avner Kalay
Tel Aviv University - Faculty of Management ( email )
P.O. Box 39010
Ramat Aviv, Tel Aviv, 69978
Israel
972 3 6406298 (Phone)
972 3 6406330 (Fax)
University of Utah - David Eccles School of Business ( email )
1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States
801-581-5457 (Phone)
Oğuzhan Karakaş
Boston College - Department of Finance ( email )
Carroll School of Management
Fulton Hall 334, 140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States
+1-617-552-1175 (Phone)
+1-617-552-0431 (Fax)
HOME PAGE: http://www2.bc.edu/~karakas/
Shagun Pant (Contact Author)
University of Iowa - Department of Finance ( email )
Iowa City, IA 52242-1000
United States
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