Ownership, control and market liquidity

Edith Ginglinger and Jacques Hamon
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Jacques Hamon: DRM - Dauphine Recherches en Management - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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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 (search for similar items in EconPapers)
Date: 2012
Note: View the original document on HAL open archive server: https://hal.science/hal-01457073v1
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Citations: View citations in EconPapers (9)

Published in Finance, 2012, 33 (2)

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Journal Article: Ownership, control and market liquidity (2012)
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