Ownership, Control and Market Liquidity

45 Pages Posted: 13 Dec 2007 Last revised: 17 Jun 2015

See all articles by Edith Ginglinger

Edith Ginglinger

Université Paris-Dauphine, PSL Research University; European Corporate Governance Institute (ECGI)

Jacques Hamon

Université Paris Dauphine - CEREG

Multiple version iconThere are 2 versions of this paper

Date Written: June 1, 2007

Abstract

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.

Keywords: ownership, blockholders, long-term shareholders, ultimate control, pyramids, voting rights, liquidity, bid-ask spread

JEL Classification: G32, G34, G14

Suggested Citation

Ginglinger, Edith and Hamon, Jacques, Ownership, Control and Market Liquidity (June 1, 2007). Paris December 2007 Finance International Meeting AFFI-EUROFIDAI Paper, Available at SSRN: https://ssrn.com/abstract=1071624 or http://dx.doi.org/10.2139/ssrn.1071624

Edith Ginglinger (Contact Author)

Université Paris-Dauphine, PSL Research University ( email )

Place du Maréchal de Tassigny
Paris, Cedex 16 75775
France

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Jacques Hamon

Université Paris Dauphine - CEREG ( email )

Place du Marechal de Lattre Tassigny
Paris
France

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