Working Paper: NBER ID: w31892
Authors: Doron Y. Levit; Nadya Malenko; Ernst G. 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: Blockholder governance; Voting premium; Corporate governance
JEL Codes: D72; D74; G34
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| blockholder actions (G34) | voting premium (D72) |
| blockholder's trades (G34) | median voter (D79) |
| median voter (D79) | expected voting outcome (D72) |
| blockholder's marginal payoff (C79) | voting premium (D72) |
| price impact of trades (G14) | blockholder's marginal payoff (C79) |
| blockholder's share purchases (G34) | voting premium (D72) |
| conflicts between dispersed shareholders and blockholders (G34) | liquidity of voting shares (G34) |