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The effect of voting rights on firm value

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  • Scherrer, Cristina Mabel
  • Fernandes, Marcelo

Abstract

We present a simple framework for dual-class stock shares in which common shareholders receive public and private cash flows (i.e., dividends and any private benefit of holding voting rights) and preferred shareholders only receive public cash flows. We isolate these two cash flows in order to identify the role of voting rights on equity-holders' wealth. In particular, using a structural cointegrated VAR model, we find a negative relationship between the value of the voting right and the preferred shareholders' wealth.

Suggested Citation

  • Scherrer, Cristina Mabel & Fernandes, Marcelo, 2021. "The effect of voting rights on firm value," LSE Research Online Documents on Economics 125648, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:125648
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    File URL: http://eprints.lse.ac.uk/125648/
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    References listed on IDEAS

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    Cited by:

    1. Yanlin Shi, 2023. "A new unique impulse response function in linear vector autoregressive models," International Review of Finance, International Review of Finance Ltd., vol. 23(2), pages 460-468, June.

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    More about this item

    Keywords

    private benefits; voting right; dual-class shares;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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