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The voting premium

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  • Malenko, Nadya
  • Levit, Doron
  • Maug, Ernst

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.

Suggested Citation

  • Malenko, Nadya & Levit, Doron & Maug, Ernst, 2021. "The voting premium," CEPR Discussion Papers 15718, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:15718
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    2. Brav, Alon & Cain, Matthew & Zytnick, Jonathon, 2022. "Retail shareholder participation in the proxy process: Monitoring, engagement, and voting," Journal of Financial Economics, Elsevier, vol. 144(2), pages 492-522.

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    More about this item

    Keywords

    Voting; Trading; Voting premium; Blockholders; Ownership structure; Shareholder rights; Corporate governance;
    All these keywords.

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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