Earnings and the Value of Voting Rights

62 Pages Posted: 11 Jun 2016 Last revised: 8 Jan 2020

See all articles by Umit Gurun

Umit Gurun

University of Texas at Dallas

Oğuzhan Karakaş

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

Date Written: December 30, 2019

Abstract

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

Suggested Citation

Gurun, Umit and Karakaş, Oğuzhan, Earnings and the Value of Voting Rights (December 30, 2019). Available at SSRN: https://ssrn.com/abstract=2793545 or http://dx.doi.org/10.2139/ssrn.2793545

Umit Gurun

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

HOME PAGE: http://www.umitgurun.com

Oğuzhan Karakaş (Contact Author)

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

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