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The Value of Voting Rights to Majority Shareholders: Evidence from Dual Class Stock Unifications

  • Hauser, Shmuel
  • Lauterbach, Beni
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    We study transactions of voting rights. In our sample of 67 dual class unifications superior vote shareholders give up their superior voting status (all firm stocks become “one share one vote†), and receive (in most cases) compensation in the form of additional stocks. Based on the compensation granted, the median price of 1% of the vote is about 0.1% of firm’s equity. More interestingly, the price of vote decreases with institutional holdings, and increases with the percentage vote lost by the majority shareholders. The position and interests of the majority holders appear as the main determinants of the price of vote.

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    Paper provided by Anderson Graduate School of Management, UCLA in its series University of California at Los Angeles, Anderson Graduate School of Management with number qt8hr5m0vp.

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    Date of creation: 11 Apr 2000
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    Handle: RePEc:cdl:anderf:qt8hr5m0vp
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    Web page: http://www.escholarship.org/repec/anderson_fin/

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    1. Zingales, Luigi, 1994. "The Value of the Voting Right: A Study of the Milan Stock Exchange Experience," Review of Financial Studies, Society for Financial Studies, vol. 7(1), pages 125-48.
    2. Bergstrom, Clas & Rydqvist, Kristian, 1990. "Ownership of equity in dual-class firms," Journal of Banking & Finance, Elsevier, vol. 14(2-3), pages 255-269, August.
    3. Smith, Brian F. & Amoako-Adu, Ben, 1995. "Relative Prices of Dual Class Shares," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 30(02), pages 223-239, June.
    4. Harris, Milton & Raviv, Artur, 1988. "Corporate governance : Voting rights and majority rules," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 203-235, January.
    5. Lease, Ronald C. & McConnell, John J. & Mikkelson, Wayne H., 1983. "The market value of control in publicly-traded corporations," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 439-471, April.
    6. DeAngelo, Harry & DeAngelo, Linda, 1985. "Managerial ownership of voting rights : A study of public corporations with dual classes of common stock," Journal of Financial Economics, Elsevier, vol. 14(1), pages 33-69, March.
    7. Horner, Melchior R., 1988. "The value of the corporate voting right : Evidence from Switzerland," Journal of Banking & Finance, Elsevier, vol. 12(1), pages 69-83, March.
    8. Levy, Haim, 1983. " Economic Evaluation of Voting Power of Common Stock," Journal of Finance, American Finance Association, vol. 38(1), pages 79-93, March.
    9. Luigi Zingales, 1995. "What Determines the Value of Corporate Votes?," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 1047-1073.
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