Journal for Studies in Economics and Econometrics

The cross-sectional variation of the market premia on high voting rights shares traded on the Tel Aviv Stock exchange is analysed. It is shown that the inequality index which is based on the ratio between the share of the high voting shares in the total votes of the firms and the share of the same in the total equity is a major explanatory variable of the cross-sectional variation. It is also shown that the Shapley-Shubik voting power index does not add to the explanation of the cross sectional variation. One potential sign of financial inefficiency, namely, deviations from the industry’s norm of debt-to-equity ratio, is positively correlated with the premia. The results support the view that market participants can detect the potential additional value embodied in high voting shares of companies.