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Price Discovery in Voting and Non-Voting Stocks

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  • Karin Niehoff

    (University of Hagen)

Abstract

When closely related assets like voting and non-voting stocks of a company are traded on the same exchange, it is of interest in which type of stock price discovery takes place first. Price discovery has not been analyzed for such strongly linked assets as voting and non-voting stocks which are traded on one exchange. This paper examines price discovery in voting and non-voting German stocks using the widely applied price discovery metrics information share developed by Hasbrouck (1995) and the common factor weights developed by Gonzalo and Granger (1995) and Harris, McInish, and Wood (2002). We show that non-voting stocks react earlier on average. Thus, we can conclude that voting rights do not enhance the process of price discovery. Further, there is evidence that price discovery does depend on the turnover of the stocks.

Suggested Citation

  • Karin Niehoff, 2016. "Price Discovery in Voting and Non-Voting Stocks," Schmalenbach Business Review, Springer;Schmalenbach-Gesellschaft, vol. 17(3), pages 285-307, December.
    • Handle: RePEc:spr:schmbr:v:17:y:2016:i:3:d:10.1007_s41464-016-0021-8
    DOI: 10.1007/s41464-016-0021-8
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    More about this item

    Keywords

    Price discovery; Market efficiency; Information share; Common factor weights; Ownership structure;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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