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Ownership, control and market liquidity

Hamon, Jacques; Ginglinger, Edith (2012), Ownership, control and market liquidity, Finance, 33, 2, p. 61-99

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SSRN-id1071624.pdf (935.9Kb)
Type
Article accepté pour publication ou publié
Date
2012
Journal name
Finance
Volume
33
Number
2
Publisher
Association française de finance
Pages
61-99
Metadata
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Author(s)
Hamon, Jacques
Dauphine Recherches en Management [DRM]
Ginglinger, Edith
Dauphine Recherches en Management [DRM]
Abstract (EN)
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.
Subjects / Keywords
Ownership; Blockholders; Long-term shareholders; Ultimate control; Pyramids; Voting rights; Liquidity; Bid-ask spread
JEL
G34 - Mergers; Acquisitions; Restructuring; Corporate Governance
G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
G14 - Information and Market Efficiency; Event Studies; Insider Trading

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