The Market Value of the Vote: A Contingent Claims Approach

50 Pages Posted: 8 Nov 2008 Last revised: 11 Mar 2010

See all articles by Avner Kalay

Avner Kalay

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

Shagun Pant

University of Iowa - Department of Finance

Date Written: January 1, 2008

Abstract

The paper presents a new methodology to estimate the market value of the right to vote that is embedded in common stocks. The difference in the price of the stock and the synthetic stock (constructed with options) quantifies the value of the right to vote during the expected life of the synthetic stock. Consistent with the theory we find that our measure increases with the expected life of the synthetic stock. We quantify the value of the right to vote during the next year at 1.64%. As expected, the value of the vote increases around special meetings and around M&A events. The evidence presented has implications for the option pricing literature as well. We point out that early exercise of Call options can be optimal even in the absence of dividends on the underlying security.

Keywords: Voting rights, Put-Call parity, Options, Vote trading

Suggested Citation

Kalay, Avner and Pant, Shagun, The Market Value of the Vote: A Contingent Claims Approach (January 1, 2008). Available at SSRN: https://ssrn.com/abstract=1296269 or http://dx.doi.org/10.2139/ssrn.1296269

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)

Shagun Pant (Contact Author)

University of Iowa - Department of Finance ( email )

Iowa City, IA 52242-1000
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
390
Abstract Views
1,645
rank
73,923
PlumX Metrics