ISSN: 2056-3736 (Online Version) | 2056-3728 (Print Version)

The Impact of Internal Governance Mechanisms on the Share Price Volatility of Listed Companies in Paris Stock Exchange

Mediha Mezhoud, Asma Sghaier and Adel Boubaker

Correspondence: Asma Sghaier,

University of Sousse (LaREMFiQ), Tunisia

pdf (704.74 Kb) | doi:


This paper investigates the impact of internal governance structure on firm-level stock return volatility in Paris Stock Exchange based on our study of a sample of 65 firms for the daily period from January 2010 to December 2012.The research has sixth hypotheses. To test each hypothesis; a model was defined based on dependent variables employed to measure the share price volatility. Our findings reveal different results by using different models of multivariate regression. The empirical results show no statistically significant relationship to any components of ownership structure. However, the results also show that the components for the board structure reduce volatility. Indeed, we document a statistically significant negative relationship between the board independence, the CEO Duality, the board size and the share price volatility. Hence, the board structure is not expected to cause severe volatility in the stock prices, which in turn, is consistent with the results of this study.


  Share price volatility, Ownership Structure, Board structure, Paris stock exchange


Agrawal, A. and Mandelker, G. N. (1990). Large shareholders and the monitoring of managers: The case of antitakeover charter  mendments. Journal of Financial and Quantitative analysis, 25(2), 143-161.

Alzeaideen, Z.and AL-Rawash, S. (2014).The Effect of Ownership Structure on Share Price Volatility of Listed Companies in Amman Stock Exchange. Research Journal of Finance and Accounting, 5(6), 192-201.

Baumann, U. and Nier, E.(2004).Disclosure, volatility and transparency: An empirical Investigation into the value of bank disclosure. Economic Policy Review, 10(2), 31-45.

Bhagat, S. and Black, B. (2002).The Non-Correlation Between Board Independence and Long-Term Performance. Journal of Corporation Law, 27 (2), 231-243.

Chaganti, R.S., Mahajan, V. and Sharma, S. (1985).Corporate board size, composition and corporate failures in retailing industry. Journal of Management Studies, 22, 400-417.

Claessens, S. (2006). Corporate governance and development. The World Bank Research Observer, 21(1), 91-122.

Daily, C. M. and Dalton, D. R. (1993). Board of directors’ leadership and structure: Control and performance implications. Entrepreneurship: Theory and Practice, 17(3), 65-82.

Denis, D. J., Denis, D. K. and Sarin, A. (1997).Ownership structure and top executive turnover. Journal of Financial Economics, 45(2), 193-221.

Diamond, D. W. and Verrecchia, R. E. (1991).Disclosure, liquidity, and the cost of capital. The Journal of Finance, 46(4), 1325-1359.

Donaldson, L. and Davis, J. H. (1991). Stewardship theory or agency theory: CEO governance and shareholder returns. Australian Journal of Management, 16(1), 49-64.

Ezazi, M. S., Sadeghi, S. J., Alipour, M. and Amjadi, H. (2011). The Effect of Ownership Structure on Share Price Volatility of Listed Companies in Tehran Stock Exchange: An Empirical Evidence of Iran. International Journal of Business and Social Science, 2(5), 163-169.

Fama, E. F. (1980). Agency Problems and the Theory of the Firm. The Journal of Political Economy, 288-307.

Ginglinger, É. (2002). L'actionnaire comme contrôleur. Revue Française de Gestion, (5), 37-55.

Godard, L. and Schatt, A. (2000). Faut-il séparer les fonctions de décision et de contrôle?., Papier de recherche présenté aux journaux internationaux de l’AFFI, ESC Paris, Juin.

Hermalin, B. E. and Weisbach, M. S. (2003). Boards of Directors as an Endogenously Determined Institution: A Survey of the Economic Literature. Economic Policy Review, 9, 17-26.

Jensen, M. C. and Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of Financial Economics, 3(4), 305-360.

Kaldor, N. (1939). Speculation and economic stability. The Review of Economic Studies, 7(1), 1-27.

Kregel, J.(2007). The Natural Instability of Financial Markets. Working Paper 253, Levy Economics Institute.

Leuz, C. and Verrecchia, R. E. (2000).The economic consequences of increased disclosure. Journal of Accounting Research, 38, 91-124.

McConnell, J. J. and Servaes, H. (1990).Additional evidence on equity ownership and corporate value. Journal of Financial Economics, 27(2), 595-612.

McKnight, P.J. and Mira, S. (2003). Corporate Governance Mechanisms, Agency Costs and Firm Performance in UK Firms, mimeo.

Minsky, H. P.(1992).The Financial Instability Hypothesis. Working Paper 74, The Jerome Levy Economics Institute of Bard College.

Mintz, S.V.(2005). Improving corporate governance systems: a stakeholder’s theory approach. Mimeo.

Morck, R., Shleifer, A. and Vishny, R. W. (1988). Management ownership and market valuation: An empirical analysis. Journal of Financial Economics, 20, 293-315.

Morck, R., Yeung, B. and Yu, W. (2000). The information content of stock markets: why do emerging markets have synchronous stock price movements?. Journal of Financial Economics, 58(1), 215-260.

Mugaloglu, Y. I. and Erdag, E. (2013). Corporate Governance, Transparency and Stock Return Volatility: Empirical Evidence from the Istanbul Stock Exchange. Journal of Applied Economics & Business Research, 3(4).

Namazi, M. and Kermani, E. (2008),“ Investigating the effects of ownership structure on the performance of the companies accepted in the Tehran stock exchange. The Iranian Auditing & Accounting Review, 15(53), 83-100.

Papadamou, S., Sidiropoulos, M. and Spyromitros, E. (2014). Does central bank transparency affect stock market volatility? Journal of International Financial Markets, Institutions and Money, 31, 362-377.

Sadeghi,S.J. and Bahadori, H. (2009).The effect of ownership structure on payout Ratio in Tehran stock exchange listed companies. Financial Research Journal, Spring-Summer, 61-80.

Sadeghi, S. J. and Panjehshahi Kafash (2008). The effect of the shareholders combination on return of Tehran stock exchange listed companies. Financial Research Journal, 51-66.

Shleifer, A.and Vishny, R. (1997).A Survey of Corporate Governance. The Journal of Finance, 52(2), 737-783.

Thomsen, S. and Pedersen, T. (2000).Ownership structure and economic performance in the largest European companies. Strategic Management Journal, 21, 689-705.

Wruck, K. H. (1989). Equity ownership concentration and firm value: Evidence from private equity financings. Journal of Financial Economics, 23(1), 3-28.

Xu, X. and Wang, Y. (1997). Ownership structure, corporate governance, and corporate performance: The case of Chinese stock companies. World Bank Publications (Vol. 1794).

Yermack, D. (1996). Higher market valuation of companies with a small board of directors. Journal of Financial Economics, 40(2), 185-211.