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

68 Pages Posted: 26 Jan 2011 Last revised: 3 Jun 2016

See all articles by Avner Kalay

Avner Kalay

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

Oğuzhan Karakaş

Cambridge Judge Business School - Finance Subject Group; European Corporate Governance Institute (ECGI)

Shagun Pant

University of Iowa - Department of Finance

Date Written: April 20, 2012

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.

Keywords: Voting Rights, Put-Call Parity, Options, Shareholder Meetings, Hedge Funds, Activism, Mergers & Acquisitions

JEL Classification: G13, G34

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 (JF), Volume 69, Issue 3, pp. 1235-1271, 2014, Available at SSRN: https://ssrn.com/abstract=1747952 or http://dx.doi.org/10.2139/ssrn.1747952

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

Cambridge Judge Business School - Finance Subject Group ( email )

University of Cambridge
Trumpington St.
Cambridge, CB2 1AG
United Kingdom

HOME PAGE: http://jbs.cam.ac.uk/faculty-research/faculty-a-z/oguzhan-karakas/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://ecgi.global/users/o%C4%9Fuzhan-karaka%C5%9F

Shagun Pant (Contact Author)

University of Iowa - Department of Finance ( email )

Iowa City, IA 52242-1000
United States

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