Institutional Investors and Stock Liquidity: Evidence from Indian Stock Market

Sudhakara Reddy Syamala, Yogesh Chauhan and Kavita Wadhwa
Additional contact information
Sudhakara Reddy Syamala: Sudhakara Reddy Syamala (Corresponding author) is Assistant Professor, F-107, Department of Finance, IBS Hyderabad, Dontanapally, Shankerpally Road, Hyderabad-501203, India. E-mail: srsudhakar@ibsindia.org
Yogesh Chauhan: Yogesh Chauhan is Assistant Professor, F-007, Department of Finance, IBS Hyderabad, Dontanapally, Shankerpally Road, Hyderabad-501203, India. E-mail: yogeshkumar@ibsindia.org
Kavita Wadhwa: Kavita Wadhwa is Assistant Professor, F-009, Department of Finance, IBS Hyderabad, Dontanapally, Shankerpally Road, Hyderabad-501203, India. E-mail: kwadhwa@ibsindia.org

Global Business Review, 2014, vol. 15, issue 3, 461-476

Abstract: The main aim of this article is to examine the relation between institutional ownership and stock liquidity. Using a large sample of Indian firm data for the period 2001–2012, we estimate two liquidity measures, Amihud illiquidity and HL-spread. We find that institutional ownership is negatively related to the stock liquidity. We also find that the negative institutional ownership–stock liquidity relation is mostly driven by foreign institutional investors (FIIs) and Bank ownership. Conversely, retail ownership is positively related to the stock liquidity. Importantly, we find that institutional investors are more likely to hold liquid stocks. These findings are consistent with the hypothesis that the level of institutional ownership proxies for informed investors, while they trade liquid stock to reduce price impact cost.

Keywords: Stock liquidity; institutional ownership; the trading hypothesis; adverse selection hypothesis (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://journals.sagepub.com/doi/10.1177/0972150914535133 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:globus:v:15:y:2014:i:3:p:461-476

DOI: 10.1177/0972150914535133

Access Statistics for this article

More articles in Global Business Review from International Management Institute
Bibliographic data for series maintained by SAGE Publications ().