The Impact of Institutional Ownership on Stock Price Synchronicity and Crash Risk
Arezoo Haghighat, Banafsheh Farhangzadeh, Mohammad Haghighat

Abstract
The aim of this paper is to analyze and to test the impact of institutional ownership on stock price synchronicity and crash risk. To test the research hypotheses we use a logistic transformation of R2 as a measure of stock price synchronicity and Down-Up volatility, NCSKEW and CRASH as measures of crash risk. The result of the linear regression model shows thatinstitutional ownership is negatively affected firms’ stock price synchronicity because institutional transactions improve the flow of firm-specific information into individual stock prices. Moreover, institutional monitoring mitigates managerial bad-news hoarding, which results in a stock price crash when the accumulated bad news is finally released. As a result, institutional ownership is negatively affected firms’ crash risk.

Full Text: PDF