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CEU Economic Seminar Series: The Voting Premium

Nadya Malenko
Tuesday, February 21, 2023, 11:15 am – 12:30 pm

Nadya Malenko (University of Michigan), who'll present “The Voting Premium” (joint work with Doron Levit and Ernst Maug).

Time and venue: February 21, Tuesday, 11.15 am – 12.30 pm, in QS C- 322, RSVP here.

Abstract: This paper develops a unified theory of blockholder governance and the voting premium. It explains how a voting premium emerges when a minority blockholder tries to influence the composition of the shareholder base, in a setting without takeovers and controlling shareholders. The model shows that empirical measures of the voting premium generally do not reflect the value of voting rights, and that the voting premium can be negligible even when the allocation of voting rights is important. Moreover, the model can explain a negative voting premium, which has been documented in several studies. It arises because of free-riding by dispersed shareholders on the blockholder's trades, which increases the price impact of trading voting shares and makes them less liquid than non-voting shares. The model also has novel implications for the relationship between the voting premium and the severity of conflicts of interest between shareholders, the price of a separately traded vote, and competition for control among blockholders.