The Value of Voting Rights to Majority Shareholders: Evidence from Dual-Class Stock Unifications

Abstract

We study 84 dual-class stock unifications, where superior vote shareholders gave up their superior voting status (all firm stocks became "one share one vote") and received (in most cases) compensation in the form of additional shares. Unifications are essentially intrafirm transactions of voting rights, and afford observation of the intrafirm-assessed price of vote. The price of vote in unifications (1) increases with the percentage vote lost by the majority shareholders, (2) is higher in family-controlled firms, (3) decreases with institutional investor holdings, and (4) is similar to the "outside" price of vote implicit in the market prices of stocks. Copyright 2004, Oxford University Press.