De-facto Voting Power and the Value of Voting Rights

Department: Finance

Speaker: Oguzhan Karakas (Cambridge Judge Business School)

Room: TBD

Abstract

We show that the market value of corporate voting rights decreases with shareholder voter turnout. A one–standard-deviation increase in turnout (13 p.p.) reduces the option-implied voting premium by 2.4 basis points, or 80% of its mean. Exploiting the 2010 NYSE Rule 452 amendment eliminating broker discretionary voting, we provide plausibly causal evidence that lower turnout raises the value of voting rights. Low turnout is persistent and predicts future contentious governance events, where relative shareholder influence is more valuable. Our findings indicate that investors value de-facto voting power and that persistent shareholder participation shapes the economic value of corporate control.