Am I Right or Am I Right? Dividend Privileges and the Value of Voting Rights

46 Pages Posted: 8 Jul 2011

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: July 2011

Abstract

The value of a right should not be lower than zero. The present paper overcomes some possible measurement errors and proposes a new measure of the voting right, the Relative Vote Segment, which incorporates dividend privileges into the inferior class of shares, when granted. Results from Italian non-voting shares listed in the 1999-2008 period show that our more accurate measure reports an average voting right equal to 45.58%, while the standard relative price difference and the Nenova (2003) measure greatly underestimate its value and report average values equal to 20.35% and 1.30%, respectively. Our methodology reports almost no negative values, while traditional measures report almost 25% of negative values. Though a more correct measure of the voting right is essential to estimate its average value and make unbiased cross-country comparisons, the determinants of the voting rights are also well captured by the relative price difference, once the dividend yield 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, Am I Right or Am I Right? Dividend Privileges and the Value of Voting Rights (July 2011). ECGI - Finance Working Paper No. 312/2011. Available at SSRN: https://ssrn.com/abstract=1881657 or http://dx.doi.org/10.2139/ssrn.1881657

Marco Bigelli (Contact Author)

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

Catholic University of the Sacred Heart of Milan ( email )

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

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