Foreign institutional ownership stability and stock price crash risk

R. Shruti and M. Thenmozhi

Journal of International Financial Markets, Institutions and Money, 2024, vol. 91, issue C

Abstract: This study investigates the impact of foreign institutional investors (FIIs) on stock price crash risk in India. Panel regression findings reveal that higher levels of FII holdings, signifying positional trading, exacerbate crash risk. Conversely, increased stability of FII holdings, indicative of active monitoring, diminishes crash risk. Notably, FIIs’ buying interest does not influence crash risk, affirming that their risk mitigation arises from active monitoring and not from curbing selling pressure. Further analysis reveals that FII stability reduces crash risk only when controlling shareholder (i.e., promoter) equity holding is low. This promoter effect is driven by domestic promoters and not foreign promoters.

Keywords: Foreign Institutional Investors; Ownership Stability; Controlling shareholders; Promoters; Stock price crash risk (search for similar items in EconPapers)
JEL-codes: G30 G32 G34 G39 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:91:y:2024:i:c:s1042443124000039

DOI: 10.1016/j.intfin.2024.101937

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