Decoupling Voting and Cash Flow Rights

Andre Speit, Paul Voss () and Andras Danis
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Paul Voss: HEC Paris

No 1501, HEC Research Papers Series from HEC Paris

Abstract: The equity lending and option market both allow investors to decouple voting and cash flow rights of common shares. We provide a theory of this decoupling. While either market enables investors to acquire voting rights without cash flow exposure, empirical studies demonstrate a substantial difference in implied vote prices. Our model explains this surprising difference by uncovering the mechanism by which vote prices in the equity lending market are endogenously lower than those implied by the option market. We show that even though votes are cheaper in the equity lending market, activists endogenously choose to purchase votes in both markets.

Keywords: decoupling; empty voting; shareholder activism; vote trading; empty creditor (search for similar items in EconPapers)
JEL-codes: G30 G34 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2024-01-24
New Economics Papers: this item is included in nep-cdm and nep-pol
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Related works:
Working Paper: Decoupling Voting and Cash Flow Rights (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:ebg:heccah:1501

DOI: 10.2139/ssrn.4679532

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