The Information Advantage of Institutional Common Owners: Evidence from Stock Price Crash Risk

In contrast with the evidence that institutional ownership increases firm-level stock price crash risk, this study finds that institutional common ownership reduces crash risk. The negative effect of institutional common ownership manifests itself through non-dedicated common owners and is more pronounced among firms whose information is more ambiguous (i.e., whether industry-wide or firm-specific). Our findings support the stabilizing role of institutional common owners in the market due to their information advantage, allowing them to better differentiate between the firm-specific and industry-wide nature of bad news, thus avoid selling on false signals. JEL Code: G12, G14, G34, M41

• Publication year

  2021

• Venue

  Social Science Research Network

• Publication date

  Unknown publication date

• Fields of study

  Not labeled

• Identifiers
  DOI 10.2139/ssrn.3871539
• External record

  Open on Semantic Scholar

• Source metadata

  Semantic Scholar

• No claims are published for this paper.

• No concepts are published for this paper.

• Common Institutional Ownership and Earnings Management*

  2021cited by this paper
• Common ownership and competition in product markets

  2021cited by this paper
• Recent Studies on Common Ownership, Firm Behavior, and Market Outcomes

  2021cited by this paper
• Does common ownership really increase firm coordination?

  2020influential reference
• Who’s Paying Attention?

  2020cited by this paper
• Disclosure incentives when competing firms have common ownership

  2019cited by this paper
• Product Market Threats and Stock Crash Risk

  2019influential reference
• Common Ownership in America: 1980–2017

  2019cited by this paper
• Common Ownership Does Not Have Anti-Competitive Effects in the Airline Industry

  2019cited by this paper
• Strategic News Releases in Equity Vesting Months

  2018influential reference
• Do ETFs Increase Volatility?

  2018cited by this paper
• Anticompetitive Effects of Common Ownership

  2018cited by this paper
• CEO age and stock price crash risk

  2017cited by this paper
• Annual Report Readability, Tone Ambiguity, and the Cost of Borrowing

  2017cited by this paper
• Commonality in Liquidity: A Demand-Side Explanation

  2016cited by this paper
• Stock Liquidity and Stock Price Crash Risk

  2016cited by this paper
• How Important are Foreign Ownership Linkages for International Stock Returns

  2015cited by this paper
• Price informativeness and stock return synchronicity: Evidence from the pricing of seasoned equity offerings

  2014cited by this paper
• Connected Stocks

  2014cited by this paper
• Stock Price Synchronicity, Crash Risk, and Institutional Investors

  2013influential reference
• Institutional Investor Stability and Crash Risk: Monitoring versus Short-Termism?

  2013influential reference
• Asset Fire Sales and Purchases and the International Transmission of Funding Shocks

  2012cited by this paper
• Product Market Threats, Payouts, and Financial Flexibility

  2012influential reference
• Stock Price Fragility

  2011cited by this paper
• Corporate Tax Avoidance and Stock Price Crash Risk: Firm-Level Analysis

  2011influential reference
• Transparency, Price Informativeness, and Stock Return Synchronicity: Theory and Evidence

  2010cited by this paper
• The Limitations of Industry Concentration Measures Constructed with Compustat Data: Implications for Finance Research

  2009influential reference
• Opaque Financial Reports, R-Square, and Crash Risk

  2008influential reference
• Asset Fire Sales (and Purchases) in Equity Markets

  2007cited by this paper
• Corporate Governance and Acquirer Returns

  2007cited by this paper
• Entry regulation as a barrier to entrepreneurship

  2006influential reference
• Do Managers Withhold Bad News

  2005cited by this paper
• Enjoying the Quiet Life? Corporate Governance and Managerial Preferences

  2003cited by this paper
• Earnings management and corporate governance: the role of the board and the audit committee

  2003cited by this paper
• Illiquidity and Stock Returns: Cross-Section and Time-Series Effects

  2002cited by this paper
• Do Institutional Investors Prefer Near-Term Earnings over Long-Run Value?

  2001cited by this paper
• Corporate Disclosure Practices, Institutional Investors, and Stock Return Volatility

  2000cited by this paper
• Forecasting Crashes: Trading Volume, Past Returns and Conditional Skewness in Stock Prices

  1999influential reference
• The Information Content of Stock Markets: Why Do Emerging Markets Have Synchronous Stock Price Movements?

  1999cited by this paper
• The Upstairs Market for Large-Block Transactions: Analysis and Measurement of Price Effects

  1996cited by this paper

• From Empire Building to Strategic Focus: Institutional Influence on Acquisition Discipline and Corporate Value

  2025cites this paper
• Can Common  Institutional Owners Inhibit Bad Mergers and Acquisitions? Evidence from China

  2023cites this paper
• Common ownership and executive pay-for-performance sensitivity: Evidence from China

  2023cites this paper