The Value of Corporate Voting Rights Embedded in Option Prices
Journal
Journal of Corporate Finance
ISSN
0929-1199
ISSN-Digital
1872-6313
Type
journal article
Date Issued
2013-09
Author(s)
Kind, Axel
;
Poltera, Marco
Abstract
This paper proposes and tests a new method to extract the value of corporate voting rights from market prices of American-style single-stock options. The method models voting-right values as non-cash dividends and backs them out via numerical optimization from prices of equity options. Simulation experiments show that the method is accurate and outperforms existing option-based approaches by reducing their measurement error from 17.2% to 1.57% in terms of root mean squared errors and almost eliminates their bias.
The paper also contributes an empirical analysis of corporate voting-right values in European companies in the time period between 2003 and 2010. Voting rights have an annualized average value of 0.37% of the share price and are significantly worth more in months in which either ordinary or extraordinary general meetings take place but no single shareholder holds a majority stake in the company. Finally, voting values are higher in companies incorporated in French-civil-law countries (France and the Netherlands) than in German-civil-law countries (Germany and Switzerland).
The paper also contributes an empirical analysis of corporate voting-right values in European companies in the time period between 2003 and 2010. Voting rights have an annualized average value of 0.37% of the share price and are significantly worth more in months in which either ordinary or extraordinary general meetings take place but no single shareholder holds a majority stake in the company. Finally, voting values are higher in companies incorporated in French-civil-law countries (France and the Netherlands) than in German-civil-law countries (Germany and Switzerland).
Language
English
Keywords
Corporate voting rights
Voting values
Equity options
Pricing
HSG Classification
contribution to scientific community
HSG Profile Area
SoM - Business Innovation
Refereed
No
Publisher
Elsevier Science
Publisher place
Amsterdam
Volume
2013
Number
22
Start page
16
End page
34
Pages
19
Subject(s)
Division(s)
Eprints ID
227067