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Determinants of the Differential Pricing between Voting and Non-Voting Shares in Brazil'

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  • Saito, Richard

Abstract

Several papers suggest that private benefits can explain the differential pricing between share classes with differential voting rights. However, in Brazil the price differential between voting and non-voting shares has been negative for several companies between July 1994 and September 2002. This paper investigates the determinants that imply this discount of voting shares vis-à-vis non-voting shares. Particularly, the paper analyzes the impacts of liquidity, dividend differential, and recent changes in legislation of the Brazilian public equity market on the voting premium. This paper ratifies that liquidity is extremely relevant to the determination of relative prices. In addition, empirical evidence confirms a negative impact of Law 9457 - revoking voting minority shareholders' tag along rights - and a positive impact of the introduction of Law 10303 - reinstating those rights to minority voting shareholders. Finally, ownership structure confirmed a positive relationship with the voting premium, but the major shareholders' voting share participation has not presented a significant relationship as in other countries.

Suggested Citation

  • Saito, Richard, 2003. "Determinants of the Differential Pricing between Voting and Non-Voting Shares in Brazil'," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 23(1), May.
    • Handle: RePEc:sbe:breart:v:23:y:2003:i:1:a:2732
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    References listed on IDEAS

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    Cited by:

    1. Carvalhal da Silva, Andre & Subrahmanyam, Avanidhar, 2007. "Dual-class premium, corporate governance, and the mandatory bid rule: Evidence from the Brazilian stock market," Journal of Corporate Finance, Elsevier, vol. 13(1), pages 1-24, March.
    2. Fernandes, Marcelo & Frango de Souza, Vitor, 2014. "Voting Premium in the Brazilian Equity Market," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 34(1), March.
    3. World Bank, 2005. "Corporate Governance Country Assessment : Brazil," World Bank Publications - Reports 8273, The World Bank Group.

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