Stabilizing or destabilizing: the effect of institutional investors on stock return volatility in an emerging market
研究了印度股市中机构投资者及其类别对股票收益波动的影响，发现机构投资者整体加剧了市场波动，其中压力不敏感型机构投资者显著增加波动，而压力敏感型影响不显著，且公司规模、危机和换手率会强化这种关系。
Purpose This study aims to examine the impact of institutional investors and their classes on the stock return volatility of an emerging market. The paper also determines the moderating role of firm size, crisis and turnover on such relationships. Design/methodology/approach The study covers nonfinancial companies of the Bombay Stock Exchange-100 index that are listed during the study period. The study uses fixed effects and systematic generalized method of moments estimators to look over the association between institutional investors and firms’ stock return volatility. Findings The study provides evidence that institutional investors destabilize the Indian stock market. It indicates that institutional investors do not engage in management activities; they earn short-term gains depending on information efficiency. Pressure-insensitive institutional investors have a significant positive relation with stock return volatility, while pressure-sensitive institutional investors do not. The study also reflects that pressure-sensitive institutional investors are underweighted in India, which jointly represents an insignificant nonlinear association between institutional ownership and stocks’ volatility. Furthermore, outcomes reveal that the intersection effect of the crisis, firm size and turnover is positively and significantly related to such relationships. Research limitations/implications The outcomes encourage initiatives that keep track of institutional investors in the Indian stock market. To control the destabilizing effect of pressure-insensitive institutional investors, regulators should follow strict regulations on their trading patterns. Moreover, it guides the potential researchers that they should also take into account the impact of other classes of ownership structure or what type of ownership can help in stabilizing or destabilizing the Indian stock market. Originality/value Abundant literature studies the relationship between institutional ownership and firm performance in the Indian context. From the standpoint of making management decisions, the return and volatility of stock returns are both different aspects. However, this study examines the effect of institutional ownership and its groups on the volatility of stock return using the panel data estimator, which was previously not discussed in the literature.