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The Value of Corporate Voting Rights Embedded in Option Prices

Kind, Axel and Poltera, Marco. (2013) The Value of Corporate Voting Rights Embedded in Option Prices. Journal of Corporate Finance, Vol. 22. pp. 16-34.

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Official URL: http://edoc.unibas.ch/dok/A6124608

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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).
Faculties and Departments:06 Faculty of Business and Economics > Departement Wirtschaftswissenschaften > Ehemalige Einheiten Wirtschaftswissenschaften > Corporate Finance (Kind)
UniBasel Contributors:Kind, Axel H.
Item Type:Article, refereed
Article Subtype:Research Article
Bibsysno:Link to catalogue
Publisher:Elsevier Science
ISSN:0929-1199
Note:Publication type according to Uni Basel Research Database: Journal article
Last Modified:25 Oct 2013 08:32
Deposited On:25 Oct 2013 08:32

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