Earnings and the Value of Voting Rights
50 Pages Posted: 11 Jun 2016 Last revised: 2 May 2018
Date Written: April 19, 2018
We examine the impact of earnings announcements on the value of shareholder voting rights (voting premium) estimated using a new technique that exploits option prices. We find the voting premium is negatively related to earnings surprises. This relation is primarily driven by unfavorable earnings surprises. The negative effect of earnings on the voting premium is more pronounced with impending shareholder meetings, shareholder activist involvement, firm performance below industry norms, and is attenuated by lower analyst forecast dispersion, more insider ownership, fewer generalizable assets. Our study highlights the opposing influences of earnings on stock price through voting and cash flow rights.
Keywords: Voting premium, Control Rights, Earnings Announcements, Corporate Governance
JEL Classification: G34, M41
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