Large Shareholdings and Corporate Control : An Analysis of Stake Purchases by French Holding Companies

The paper analyses the value creation benefits of the holding form of organization in France. For a sample of 122 non-controlling stake purchases in French listed companies, stakes purchased by holding companies generate non- significantly price reactions in target firms, compared to a significant 6.2% on average for other acquirors. Bidder quality affects the abnormal returns and the market appears to properly anticipate further takeover activity. Stake purchases are not accompanied by significant changes in target operational performance. Executive turnover in incumbent managements is smaller when the acquiror is a holding company and no abnormal bidder returns can be detected. The combined evidence questions the ability of holding companies to create value for the firms they control or their own shareholders