What Does the Value of Corporate Votes Tell Us About Future Stock Returns?

Firms with higher (lower) vote values have significantly lower (higher) future returns. Constructing portfolios based on an option-based measure of the value of voting rights yields average return spreads of about 80 basis points per month, and the return differences persist up to ten months. Our results cannot be explained by models of informed trading, or liquidity and other factors known to affect stock prices. An alternative measure of vote value based on dual class firms generates similar results. Our findings highlight the importance of the value of voting rights in understanding the cross section of stock returns