Many companies maintain two or more different classes of stock, for a variety of business reasons. When valuing a minority interest, is there a difference in value between voting and non-voting shares? If so, how much is that difference?

In the 1980s and 1990s there were four major studies of publicly traded companies with at least two different classes of common shares. The first study, conducted by Lease, McConnell and Mickkelson, identified 26 corporations between January 1941 and December 1978 that had two classes of common stock, with equivalent dividend and liquidation preferences, actively traded on the public market. This study found that the average price premium for voting stock was 5.44 percent.

In 1991, O’Shea and Siwicki published a study identifying 46 U.S. companies with publicly traded voting and non-voting stock. The median premium found in this study was 1.3 percent. The authors pointed out, however, that in all but six of the companies, superior dividend or liquidation rights compensated for inferior voting rights. As a result, the authors concluded that the valuator must exercise judgment and analyze the relevant facts on a case-by-case basis.

The Smith and Amoako-Adu study, published in June 1995, looked at dual class stock of Canadian companies trading on the Toronto Stock Exchange between 1981 and 1986 and between 1988 and 1992. The median premium for the first period was 4.17 percent, and for the second period, the median premium was 6.37 percent. Keep in mind, however, that because of differences between Canadian and U.S. security laws regarding non-voting stock, this study may have limited applicability to U.S. companies.

In June 1996, Houlihan Lokey Howard & Zukin published a study of 375 companies with two or more stock issues outstanding and a market capitalization greater than $15 million. From this group, 259 were eliminated based on differing dividend rights and/or liquidation preferences. The median voting premium ranged from 1.15 percent for the 60-day moving average to 2.83 percent for the 260-day moving average. Their study concluded that the value of voting rights is probably somewhat less than the 5.44 percent premium derived from the Lease, McConnell and Mikkelson study.

These studies provide valuators with useful benchmarks for assessing the impact of voting rights on stock value. But they also demonstrate the importance of exercising judgment and determining the appropriate premium or discount, if any, based on an analysis of the actual stock being valued.