IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Ownership, Control and Liquidity

  • Ronald Anderson
  • Malika Hamadi

    ()

    (Luxembourg School of Finance, University of Luxembourg)

Registered author(s):

    In this paper we study the ways in which the firm's choice of liquid assets is affected by the pattern of share ownership and by the control structures within the firm. We distinguish between three separate ways in which these relationships can affect liquid- ity. First, ownership concentration may be associated with risk aversion which leads the firm to hold greater amounts of liquidity. Second, greater power for insiders will lead the firm to hold more liquid assets as these may be more readily transformed in ways that are advantageous to insiders. Third, firms with close association to an industrial group reinforced through cross share holding will tend to hold fewer liquid assets than will a firm without such relationships. We explore these explanations using a data set of Belgian firms that is particularly well suited to studying the institutions of control oriented finance. The data includes information on ownership concentration, managerial ownership, voting alliances, membership in family groups, association with holding companies, associations with coordination centers, and institutional cross-share holdings. Our results provide support for all three of the effects identified above. The effects of risk aversion and the industrial cross share holding appear to be statistically and economically most significant.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.lsf.lu/eng/content/download/490/2668/file/07-08.pdf
    Our checks indicate that this address may not be valid because: 404 Not Found (http://www.lsf.lu/eng/content/download/490/2668/file/07-08.pdf [302 Found]--> http://www.uni.lu/luxembourg_school_of_finance/eng/content/download/490/2668/file/07-08.pdf [301 Moved Permanently]--> http://wwwfr.uni.lu/luxembourg_school_of_finance/eng/content/download/490/2668/file/07-08.pdf). If this is indeed the case, please notify (Martine Zenner)


    Download Restriction: no

    Paper provided by Luxembourg School of Finance, University of Luxembourg in its series LSF Research Working Paper Series with number 07-08.

    as
    in new window

    Length:
    Date of creation: 2007
    Date of revision:
    Handle: RePEc:crf:wpaper:07-08
    Contact details of provider: Postal: Bâtiment K2, 4, rue Albert Borschette, L-1246 Luxembourg-Kirchberg
    Phone: +352 46 66 44 6335
    Fax: +352 46 66 44 6811
    Web page: http://wwwen.uni.lu/luxembourg_school_of_finance
    Email:


    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Andrei Shleifer & Robert W. Vishny, 1996. "A Survey of Corporate Governance," NBER Working Papers 5554, National Bureau of Economic Research, Inc.
    2. Randall K. Morck & David A. Strangeland & Bernard Yeung, 1998. "Inherited Wealth, Corporate Control and Economic Growth," William Davidson Institute Working Papers Series 209, William Davidson Institute at the University of Michigan.
    3. Demsetz, Harold & Lehn, Kenneth, 1985. "The Structure of Corporate Ownership: Causes and Consequences," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1155-77, December.
    4. Rajan, Raghuram G & Zingales, Luigi, 1995. " What Do We Know about Capital Structure? Some Evidence from International Data," Journal of Finance, American Finance Association, vol. 50(5), pages 1421-60, December.
    5. Tim Opler & Lee Pinkowitz & Rene Stulz & Rohan Williamson, 1997. "The Determinants and Implications of Corporate Cash Holdings," NBER Working Papers 6234, National Bureau of Economic Research, Inc.
    6. Baskin, Jonathan B, 1987. "Corporate Liquidity in Games of Monopoly Power," The Review of Economics and Statistics, MIT Press, vol. 69(2), pages 312-19, May.
    7. Andrei Shleifer & Fausto Panunzi & Mike Burkart, 2002. "Family firms," LSE Research Online Documents on Economics 24926, London School of Economics and Political Science, LSE Library.
      • Mike Burkart & Fausto Panunzi & Andrei Shleifer, 2003. "Family Firms," Journal of Finance, American Finance Association, vol. 58(5), pages 2167-2202, October.
    8. Maury, Benjamin, 2006. "Family ownership and firm performance: Empirical evidence from Western European corporations," Journal of Corporate Finance, Elsevier, vol. 12(2), pages 321-341, January.
    9. Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer, 1998. "Corporate Ownership Around the World," NBER Working Papers 6625, National Bureau of Economic Research, Inc.
    10. Sraer, David & Thesmar, David, 2004. "Performance and Behaviour of Family Firms: Evidence from the French Stock Market," CEPR Discussion Papers 4520, C.E.P.R. Discussion Papers.
    11. Stewart C. Myers & Raghuram G. Rajan, 1995. "The Paradox of Liquidity," NBER Working Papers 5143, National Bureau of Economic Research, Inc.
    12. Faccio, Mara & Lang, Larry H. P., 2002. "The ultimate ownership of Western European corporations," Journal of Financial Economics, Elsevier, vol. 65(3), pages 365-395, September.
    13. Andrew Carverhill & Ron Anderson, 2005. "A Model of Corporate Liquidity," FMG Discussion Papers dp529, Financial Markets Group.
    14. Axel, GAUTIER & Malika, HAMADI, 2005. "Internal Capital Market Efficiency of Belgian Holding Companies," Discussion Papers (ECON - Département des Sciences Economiques) 2004037, Université catholique de Louvain, Département des Sciences Economiques.
    15. Titman, Sheridan & Wessels, Roberto, 1988. " The Determinants of Capital Structure Choice," Journal of Finance, American Finance Association, vol. 43(1), pages 1-19, March.
    16. Becht, Marco & Roell, Ailsa, 1999. "Blockholdings in Europe:: An international comparison1," European Economic Review, Elsevier, vol. 43(4-6), pages 1049-1056, April.
    17. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    18. Steven M. Fazzari & Bruce C. Petersen, 1993. "Working Capital and Fixed Investment: New Evidence on Financing Constraints," RAND Journal of Economics, The RAND Corporation, vol. 24(3), pages 328-342, Autumn.
    19. Dittmar, Amy & Mahrt-Smith, Jan & Servaes, Henri, 2003. "International Corporate Governance and Corporate Cash Holdings," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 38(01), pages 111-133, March.
    20. Anderson, Ronald W. & Carverhill, Andrew, 2005. "A Model of Corporate Liquidity," CEPR Discussion Papers 4994, C.E.P.R. Discussion Papers.
    21. Kim, Chang-Soo & Mauer, David C. & Sherman, Ann E., 1998. "The Determinants of Corporate Liquidity: Theory and Evidence," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 33(03), pages 335-359, September.
    22. Ronald C. Anderson & David M. Reeb, 2003. "Founding-Family Ownership and Firm Performance: Evidence from the S&P 500," Journal of Finance, American Finance Association, vol. 58(3), pages 1301-1327, 06.
    23. Zwiebel, Jeffrey, 1995. "Block Investment and Partial Benefits of Corporate Control," Review of Economic Studies, Wiley Blackwell, vol. 62(2), pages 161-85, April.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:crf:wpaper:07-08. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Martine Zenner)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.