The Market Value of Corporate Votes Based on Option Prices - Evidence from Central and Southern Europe

Abstract: We investigate the value of the right to vote (voting premium) by means of an option-based methodology in Central and Southern Europe on the basis of observations from Germany, Switzerland, the United Kingdom, Italy, France and Spain between 2006 and 2008. We find the mean annualized voting premium on an aggregate country basis to be 1.04%, with the highest and lowest mean voting premiums observed in Italy and Switzerland, respectively and, moreover, conclude that the voting premiums found in Southern European countries exceed those found in the Central European ones. Furthermore, we analyze the time- series variation of the value of the vote around shareholder meetings and, contrary to theory, find no statistical evidence on an increase of the voting premium prior to these meetings in all countries except for France. Lastly, we control for determinants commonly linked to the voting premium and find a significant impact of private benefits of control, leverage, liquidity and firm performance on the value of the vote.