Estimating the value of the shareholder voting rights using ELW prices

In this paper, we measure the value of voting rights in firms listed on the Korea Exchange (KRX) using the Kalay, Karakas, and Pant (2014) model. We use Equity Linked Warrant (ELW) to construct nonvoting synthetic stock. We investigate how the value of voting rights responds around annual shareholder meetings and announcements of share repurchases and disposals of repurchased shares to identify whether controlling shareholders try to extract the private benefits of control in these two events where controlling contest becomes important. We find a statistically significant 1% and about 0.4% increase in the value of voting rights prior to annual shareholder meetings and after announcements of share repurchases and disposals respectively. Our research contributes a new perspective to identifying the private benefits of control by looking at the specific corporate events in Korea.