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Ownership, control and market liquidity

  • Hamon, Jacques
  • Ginglinger, Edith

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.

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File URL: http://basepub.dauphine.fr/xmlui/bitstream/123456789/9676/2/SSRN-id1071624.pdf
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Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/9676.

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Date of creation: 2012
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Publication status: Published in Finance, 2012, Vol. 33, no. 2. pp. 61-99.Length: 38 pages
Handle: RePEc:dau:papers:123456789/9676
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