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Economic Evaluation of Voting Power of Common Stock



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    • * The Hebrew University, Jerusalem and the Department of Finance and the Center for Econometrics and Decision Sciences, University of Florida. The author acknowledges the helpful comments and suggestions of Zvi Lerman, John J. McConnell, and the Editor of this Journal. The research was supported in part by a grant from the Zaggagi Foundation.


This paper presents an economic evaluation of common stock voting rights. An index of relative voting rights inequality for different classes of stock of the same corporation is constructed and the empirical relationship between the market premium on a superior-voting stock and the voting inequality index is examined. In only three out of the 25 cases could investors have arbitraged between the two classes of stock, although in one case the arbitrage opportunity persisted for several months.

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