Overview
We provide evidence that lower shareholder voter turnout increases the market value of voting rights. Turnout is highly persistent, allowing investors to anticipate participation rates and price voting power accordingly. For identification, we exploit the 2010 NYSE Rule 452 amendment, which eliminated broker discretion over uninstructed shares, as an exogenous shock to turnout in director elections. We further show that low turnout predicts contentious governance events in which votes are more pivotal, and that the negative voting premium–turnout relation strengthens when such events are more likely. These findings indicate that investors price de-facto voting power and that persistent participation patterns shape the value of corporate control.
Project researchers
Oğuzhan Karakaş
Cambridge Judge Business School – Finance Subject Group; European Corporate Governance Institute (ECGI)
Vikas Agarwal
London Business School
Peter Limbach
University of Bielefeld
Honglin Ren
Renmin Business School
Research summary: Do investors care about who actually votes?
This paper studies whether investors value voting rights based on who actually votes (de‑facto power), rather than just who formally holds the votes (de‑jure rights). The key idea is that when fewer shareholders participate, each vote becomes more influential and may therefore be more valuable.
Shareholder voting is a central, low-cost form of governance and activism, yet turnout is not universal. In U.S. firms, average turnout is about 80 %, but it varies widely, and fell sharply after the 2010 NYSE Rule 452 reform that restricted brokers’ discretionary voting. Because most decisions are made on a votes‑cast basis, low turnout means that a given voting stake can translate into much greater effective influence.
Building on theories of control and pivotal voting, the paper tests whether the voting premium – the extra value of voting rights over pure cash-flow rights – depends on expected turnout. Using the option price–based measure of voting rights proposed by Kalay, Karakaş, and Pant (2014), the authors show that the voting premium increases as shareholder turnout decreases. The relation is strongest at low participation rates and flattens once turnout exceeds roughly 75–80 %.
Regression analysis confirms that lower past turnout predicts higher future voting premia, even after controlling for firm characteristics, ownership, governance, and liquidity. A regulatory shock, the 2010 NYSE Rule 452 amendment, provides quasi-causal evidence: firms more exposed to the reform experience both a larger drop in turnout and a significant rise in voting premia.
Overall, the findings show that markets price de‑facto voting power – effective influence based on participation – and that voting standards and persistent turnout patterns shape both governance dynamics and the economic value of corporate control.
