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Finance

2012/2 (Vol. 33)


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Abstract

English

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.

Outline

  1. Introduction
  2. Data
    1. Euronext data
    2. Ownership and governance in France
    3. Determining ultimate ownership
  3. Liquidity measures and methodology
  4. Empirical results
    1. Controlling blockholders and liquidity
    2. Means of enhancing control and market liquidity
    3. Ownership structure, means of enhancing control and asymmetry of information
  5. Robustness checks
  6. Conclusion

To cite this article

Edith Ginglinger, Jacques Hamon, “ Ownership, control and market liquidity ”, Finance 2/2012 (Vol. 33) , p. 61-99
URL : www.cairn.info/revue-finance-2012-2-page-61.htm.

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