Impact of ownership structure on stock liquidity in financial crisis

Abstract

Ownership structure is one of the important issues faced by companies. Especially, it plays a vital role in stock market liquidity. Prior studies have established links between ownership structure, firm performance, and stock liquidity, but their results are mixed and inconclusive. The importance in this research is to study the effect of ownership structure on stock market liquidity in a context characterized by its concentration and where there is an excess of certain types of stockholders, including institutional investors or family members. Therefore, we choose to explore this relationship in French-listed companies. In addition, the role that ownership structure plays is considered as important. The expectation of managers and shareholders is to determine the optimal ownership structure that protects companies in normal situations, and in crisis as well. Therefore, this study explores the role ownership structure plays in determining the stock liquidity during and after the financial crisis period from 2003 to 2015. After employing the panel regression method, we report a nonlinear relationship between ownership structure and stock liquidity during and after the global financial crisis. Institutional ownership, although having a strong effect in the post-crisis period (2010–2015), shows no influence on liquidity during the crisis (2008––2009). We also find that family ownership shows no significant effect in the crisis period (2008–2009) and the post-crisis period (2010–2015). However, it has a significant coefficient during the period 2003–2015.