We study the relationship between liquid asset holding and the pattern of share ownership and control structures within the firm. We explore these issues using a data set of Belgian firms that is particularly well suited to studying the institutions of control oriented finance. The data include information on ownership concentration, voting alliances, managerial ownership, membership in family groups, institutional cross-share holdings, and coordination centers which under Belgian law permit consolidation of earnings and cash flow for a group of firms. We show that financial structures in Belgium are strongly control oriented as evidenced by the very high levels of observed ownership concentration and the prevalence of pyramids, voting alliances, and participation in family groups. We find that the level of liquid asset holding is positively associated with ownership concentration and that this effect is particularly marked for family firms. Given the difficulties of family firms in achieving effective wealth diversification we interpret these results as indicating liquid asset holding is largely motivated by risk aversion. Cash holding is negatively associated with institutional cross share holdings, suggesting that these cross holdings facilitate an effective internal capital market. We find little evidence that managers have an independent influence on cash holdings.
