Public Debate and Stock Prices: Evidence from the Voting Premium
Tilburg University - Center and Faculty of Economics and Business Administration; Tilburg University - European Banking Center
Stockholm School of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swedish House of Finance
June 7, 2014
ECGI - Finance Working Paper No. 375
An intense debate on the use of limited-voting shares developed in the UK between 1955 and 1970. We show that negative news coverage of limited-voting shares is associated with an increase in the relative price of voting and limited-voting shares, even if no new material information is revealed. The effects are stronger for firms that are difficult to arbitrage. Furthermore, negative news coverage is followed by lower returns for voting shares than for limited-voting shares. Our results suggest that the public debate may have limited firms’ ability to use limited-voting shares and have broader implications for corporate governance.
Number of Pages in PDF File: 45
Keywords: Corporate Governance, Dual Class Shares, Public Debate
JEL Classification: G02, G1, G3
Date posted: September 1, 2012 ; Last revised: June 8, 2014
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