The Voting Premium

Levit, Doron; Malenko, Nadya; Maug, Ernst G.

doi:10.2139/ssrn.3759761

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The Voting Premium

European Corporate Governance Institute – Finance Working Paper No. 720/2021

Olin Business School Center for Finance & Accounting Research Paper No. Forthcoming

71 Pages Posted: 5 Jan 2021 Last revised: 21 Nov 2023

See all articles by Doron Levit

Doron Levit

University of Washington - Michael G. Foster School of Business; European Corporate Governance Institute (ECGI); Center for Economic and Policy Research

Boston College, Carroll School of Management; National Bureau of Economic Research (NBER); Finance Theory Group (FTG); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Ernst G. Maug

University of Mannheim Business School; European Corporate Governance Institute (ECGI)

There are 3 versions of this paper

Date Written: September 03, 2024

Abstract

This paper develops a unified theory of blockholder governance and the voting premium, in a setting without takeovers and controlling shareholders. A voting premium emerges when a minority blockholder tries to influence the composition of the shareholder base by accumulating votes and buying shares from dissenting shareholders. Empirical measures of the voting premium do not reflect the value of voting rights or voting power. A negative voting premium results from free-riding by dispersed shareholders on the blockholder's trades. Conflicts between dispersed shareholders and the blockholder endogenously increase the liquidity of voting shares, but do not necessarily increase the voting premium.

Keywords: Voting, trading, voting premium, blockholders, ownership structure, shareholder rights, corporate governance

JEL Classification: D74, D82, D83, G34, K22

Suggested Citation: Suggested Citation

Levit, Doron and Malenko, Nadya and Maug, Ernst G., The Voting Premium (September 03, 2024). European Corporate Governance Institute – Finance Working Paper No. 720/2021, Olin Business School Center for Finance & Accounting Research Paper No. Forthcoming, Available at SSRN: https://ssrn.com/abstract=3759761 or http://dx.doi.org/10.2139/ssrn.3759761