Heterogeneity of Institutional Ownership and Stock Price Delay

81 Pages Posted: 15 Feb 2018

See all articles by Jiun-Lin Chen

Jiun-Lin Chen

University of Adelaide; Financial Research Network (FIRN)

Shih-Cheng Lee

Yuan Ze University

Chien‐Ting Lin

Deakin University - School of Accounting, Economics and Finance

Ping-Wen Sun

Minjiang University - Newhuadu Business School

Date Written: January 23, 2018

Abstract

This study examines how heterogeneous institutional ownership affects stock price delay. Our result shows higher total institutional ownership and the number of institutions reduce price delay. We further classify institution types from stock’s perspective (top 5 and year-long) and institution’s perspective (low churn rate, high churn rate, concentrated, skilled, and independent). After controlling the total institutional ownership, investor attention, and firm characteristic variables, we find ownership from top 5 and low churn rate, and ownership increase from independent institutions help lower price delay while high churn rate, concentrated, and skilled institutional ownerships increase the delay. Moreover, the price delay components related to year-long, high churn rate, concentrated, and skilled institutions are positively associated with expected stock returns. Our results suggest while top 5 and low churn rate institutions actively monitor firms and reduce price delay, high churn rate, concentrated, and skilled institutions may utilize their information advantage and hinder uninformed investors’ trading, resulting in delayed price adjustment to information.

Keywords: institutional ownership, stock price delay, market frictions, information asymmetry, information efficiency

JEL Classification: G12, G14, G20

Suggested Citation

Chen, Jiun-Lin and Lee, Shih-Cheng and Lin, Chien‐Ting and Sun, Ping-Wen, Heterogeneity of Institutional Ownership and Stock Price Delay (January 23, 2018). Available at SSRN: https://ssrn.com/abstract=3118118 or http://dx.doi.org/10.2139/ssrn.3118118

Jiun-Lin Chen

University of Adelaide ( email )

No 233 North Terrace, School of Commerce
Adelaide, South Australia 5005
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Shih-Cheng Lee

Yuan Ze University ( email )

135, Far-East Rd., Chung-Li
Taoyuan, ROC
Taiwan

Chien‐Ting Lin

Deakin University - School of Accounting, Economics and Finance ( email )

221 Burwood Highway
Burwood, Victoria 3215
Australia

Ping-Wen Sun (Contact Author)

Minjiang University - Newhuadu Business School ( email )

Fujian
China

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