Dividend Privileges and the Value of Voting Rights: Evidence from Italy

37 Pages Posted: 6 Jul 2011 Last revised: 6 Mar 2014

See all articles by Marco Bigelli

Marco Bigelli

University of Bologna - Department of Management

Ettore Croci

Catholic University of the Sacred Heart of Milan

Multiple version iconThere are 2 versions of this paper

Date Written: September 12, 2013

Abstract

The present paper proposes a new measure of the voting right, the Relative Vote Segment, which incorporates dividend privileges into the inferior class of shares. We test and compare it against the standard Relative Price Difference and the Nenova (2003) measure using 1998-2008 data from Italy, a country where dividend privileges are relevant. Results show that when dividend privileges are considered, the average voting right equals 35.63%, while its estimated value corresponds to a significantly lower 20.35% and 1.29% with the Relative Price Difference and the Nenova (2003) measure, respectively. Negative values of voting rights drop significantly with our methodology. Results become even more clear-cut when we clean the sample of possible measurement errors. As far as the determinants of the voting premium are concerned, the choice of the measure does not appear to have a significant impact, as long as the dividend differences are controlled for.

Keywords: non-voting shares, voting premium, dual-class share firms, Italy

JEL Classification: G34

Suggested Citation

Bigelli, Marco and Croci, Ettore, Dividend Privileges and the Value of Voting Rights: Evidence from Italy (September 12, 2013). Journal of Empirical Finance, 2013, vol. 24, pages 94-107. Available at SSRN: https://ssrn.com/abstract=1879763 or http://dx.doi.org/10.2139/ssrn.1879763

Marco Bigelli

University of Bologna - Department of Management ( email )

Via Capo di Lucca 34
Bologna, 40126
Italy
+39 051 2098060 (Phone)
+39 051 6390612 (Fax)

Ettore Croci (Contact Author)

Catholic University of the Sacred Heart of Milan ( email )

Largo Gemelli, 1
Via Necchi 9
Milan, MI 20123
Italy

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