Ownership, Control and Market Liquidity
Université Paris Dauphine - CEREG
June 1, 2007
Paris December 2007 Finance International Meeting AFFI-EUROFIDAI Paper
We examine how ownership concentration and the separation of ownership and control affect secondary-market liquidity in France. We find that firms with a large insider blockholder exhibit significantly lower liquidity. However, different methods of enhancing control affect liquidity in different ways. Pyramid structures impair market liquidity. Double voting right shares, a French specific means of control enhancement rewarding long-term shareholders and restraining insiders from trading their shares, lead to increased liquidity, especially for family firms. Our results suggest that by using double voting rights to enhance their control, a transparent decoupling mechanism, rather than pyramids, an opaque decoupling mechanism, blockholders offer higher secondary-market liquidity to outside investors.
Number of Pages in PDF File: 45
Keywords: ownership, blockholders, long-term shareholders, ultimate control, pyramids, voting rights, liquidity, bid-ask spread
JEL Classification: G32, G34, G14working papers series
Date posted: December 13, 2007 ; Last revised: March 17, 2011
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