Institutional investor distraction and executive opportunistic stock selling

Jiahui Cao, Cheng Jiang, Yunning Zhao and Jianhui Zeng

International Review of Financial Analysis, 2025, vol. 107, issue C

Abstract: The study explores whether distracted institutional investors increase the opportunistic share reduction behavior of corporate executives, by using an external shock to institutional shareholders' portfolios to construct an index of institutional investor distraction. We find that institutional investor distraction increases executives' opportunistic stock selling behavior, and the findings hold through a series of robustness tests. In addition, through the economic mechanism discussion, we evidence that the institutional investor distraction increases executives' opportunistic reduction behavior by internally reducing corporate governance and externally increasing stock mispricing. Last, the study conducts heterogeneity analysis at the level of audit quality and information disclosure, and finds that institutional investor distraction is more tend to increase executives' opportunistic stock selling in firms with non-Big 4 audit and poorer information disclosure quality. Our findings reflect the vital role played by institutional investors in corporate regulation and emphasize the importance of institutional investor regulation.

Keywords: Institutional investor distraction; Opportunistic stock selling; Corporate governance; Stock mispricing (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:107:y:2025:i:c:s1057521925007306

DOI: 10.1016/j.irfa.2025.104643

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