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The Voting Premium

CEPR Discussion Paper No. DP15718

66 Pages Posted: 11 Feb 2021

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

Nadya Malenko

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)

Multiple version iconThere are 3 versions of this paper

Date Written: January 2021

Abstract

This paper develops a theory of blockholder governance and the voting premium. A blockholder and dispersed shareholders first trade in a competitive market and then vote at a shareholder meeting. A positive voting premium emerges only if the blockholder is not the median voter, since he is then willing to pay a higher price to move the median voter in his preferred direction. Hence, the voting premium does not emerge from exercising control, but from influencing who exercises control. Empirical measures of the voting premium generally do not reflect the economic value of voting rights to the blockholder, and the voting premium is unrelated to measures of voting power, such as the probability of being pivotal. A negative voting premium can emerge in situations when dispersed shareholders could free-ride on the blockholder's trades.

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

Suggested Citation

Levit, Doron and Malenko, Nadya and Maug, Ernst G., The Voting Premium (January 2021). CEPR Discussion Paper No. DP15718, Available at SSRN: https://ssrn.com/abstract=3783944

Doron Levit (Contact Author)

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Center for Economic and Policy Research ( email )

Nadya Malenko

Boston College, Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Finance Theory Group (FTG) ( email )

United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Ernst G. Maug

University of Mannheim Business School ( email )

L9, 1-2
Mannheim, 68131
Germany
+49 621 181-1952 (Phone)

HOME PAGE: http://cf.bwl.uni-mannheim.de/de/people/maug/

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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