The effect of voting rights on firm value

Cristina Mabel Scherrer; Marcelo Fernandes

doi:10.1111/irfi.12318

The effect of voting rights on firm value

Cristina Mabel Scherrer, Marcelo Fernandes

Norwich Business School

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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.

Original language	English
Pages (from-to)	1106-1111
Number of pages	6
Journal	International Review of Finance
Volume	21
Issue number	3
Early online date	3 Jul 2020
DOIs	https://doi.org/10.1111/irfi.12318
Publication status	Published - Sept 2021

Keywords

dual-class shares
private benefits
voting right

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10.1111/irfi.12318Licence: CC BY-NC-ND

Published_VersionFinal published version, 725 KBLicence: CC BY-NC-ND

https://onlinelibrary.wiley.com/doi/abs/10.1111/irfi.12318Licence: CC BY-NC-ND

Cite this

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AB - 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.

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The effect of voting rights on firm value

Abstract

Keywords

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