Abstract: This paper develops a unified theory of blockholder governance and the voting premium. It explains how and why a voting premium emerges in the absence of takeovers and controlling shareholders. The model features a minority blockholder and dispersed shareholders, who trade shares in a competitive market, and those who own shares after trading vote on a proposal. A voting premium can emerge from the blockholder’s desire to influence who exercises control, rather than from exercising control himself. The model shows that empirical measures of the voting premium generally do not reflect the value of voting rights, and that the voting premium can be negligible even when the allocation of voting rights is important. Moreover, the model can explain a negative voting premium, which has been documented in several studies. It arises because of free-riding by dispersed shareholders on the blockholder’s trades, which increases the price impact of trading voting shares and makes them less liquid than non-voting shares. The model also has novel implications for the relationship between the voting premium and the severity of conflicts of interest between shareholders, the price of a separately traded vote, and competition for control among blockholders.

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