Public Debate and Stock Prices: Evidence from the Voting Premium

Mariassunta Giannetti and Fabio Braggion

No 9619, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: An intense debate on the use of limited-voting shares developed in the UK during the 1950s. Using a unique hand-collected dataset, we show that negative news coverage of limited-voting shares is associated with an increase in the relative price of voting and limited-voting shares (the voting premium), even if no new material information has been revealed. The effects are stronger for firms that are difficult to arbitrage. Furthermore, a higher voting premium and negative news for dual class firms are followed by lower returns for voting shares than for limited-voting shares suggesting a reversion to fundamentals. Taken together, our results indicate that during this period investors? views may have limited firms? ability to use limited-voting shares and have broader implications on the effects of investors? views for stock prices and corporate governance.

Keywords: Category; Public opinion; Corporate governance; Dual class shares (search for similar items in EconPapers)
JEL-codes: G02 G1 G3 (search for similar items in EconPapers)
Date: 2013-09
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Citations: View citations in EconPapers (1)

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