Public Debate and Stock Prices: Evidence from the Voting Premium

52 Pages Posted: 3 Sep 2013

See all articles by Fabio Braggion

Fabio Braggion

Tilburg University - Center and Faculty of Economics and Business Administration; Tilburg University - European Banking Center

Mariassunta Giannetti

Stockholm School of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Swedish House of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: September 2013

Abstract

An intense debate on the use of limited-voting shares developed in the UK during the 1950s. Using a unique hand-collected dataset, 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 (the voting premium), even if no new material information has been revealed. The effects are stronger for firms that are difficult to arbitrage. Furthermore, a higher voting premium and negative news for dual class firms are followed by lower returns for voting shares than for limited-voting shares suggesting a reversion to fundamentals. Taken together, our results indicate that during this period investorsÂ’ views may have limited firmsÂ’ ability to use limited-voting shares and have broader implications on the effects of investorsÂ’ views for stock prices and corporate governance.

Keywords: Category, Corporate Governance, Dual Class Shares, Public Opinion

JEL Classification: G02, G1, G3

Suggested Citation

Braggion, Fabio and Giannetti, Mariassunta, Public Debate and Stock Prices: Evidence from the Voting Premium (September 2013). CEPR Discussion Paper No. DP9619. Available at SSRN: https://ssrn.com/abstract=2319965

Fabio Braggion (Contact Author)

Tilburg University - Center and Faculty of Economics and Business Administration ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Tilburg University - European Banking Center ( email )

PO Box 90153
Tilburg, 5000 LE
Netherlands

Mariassunta Giannetti

Stockholm School of Economics ( email )

P.O. Box 6501
Sveavagen 65
SE-113 83 Stockholm
Sweden
+46 8 736 9607 (Phone)
+46 8 312 327 (Fax)

HOME PAGE: http://sites.google.com/site/mariassuntagiannetti/Home

Centre for Economic Policy Research (CEPR)

London
United Kingdom

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

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