The Voting Premium
65 Pages Posted: 5 Jan 2021 Last revised: 15 Dec 2023
Date Written: November 15, 2023
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
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