Working Paper: CEPR ID: DP15718
Authors: Doron Levit; Nadya Malenko; Ernst Maug
Abstract: This paper develops a unified theory of blockholder governance and the voting premium, in a setting without takeovers and controlling shareholders. A voting premium emerges when a minority blockholder tries to influence the composition of the shareholder base by accumulating votes and buying shares from dissenting shareholders. Empirical measures of the voting premium do not reflect the value of voting rights or voting power. A negative voting premium results from free-riding by dispersed shareholders on the blockholder's trades. Conflicts between dispersed shareholders and the blockholder endogenously increase the liquidity of voting shares, but do not necessarily increase the voting premium.
Keywords: voting; trading; voting premium; blockholders; ownership structure; shareholder rights; corporate governance
JEL Codes: D74; D82; D83; G34; K22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| blockholder's trade (F19) | identity of the median voter (D79) |
| identity of the median voter (D79) | voting outcome (D72) |
| blockholder's ability to accumulate shares (G34) | identity of the median voter (D79) |
| blockholder's ability to accumulate shares (G34) | voting premium (D72) |
| blockholder's trade (F19) | voting premium (D72) |
| conflicts between dispersed shareholders and blockholder (G34) | liquidity of voting shares (G34) |
| blockholder's trade influences (F14) | shareholder composition (G34) |
| blockholder's marginal payoff from acquiring additional voting rights (D72) | voting premium (D72) |