Investor heterogeneity and negative skewness in stock returns: Evidence from institutional investors?

Stephane GOUTTE, Samir SAADI, Ramzi Benkraiem, Hui Zhu, Steven Zhu

We examine the relation between the probability of future stock price crash and investors’ investment horizons. Using negative skewness as a proxy for firm-specific crash risk, we document a positive association between institutional ownership and stock price crash risk. The relation is, however, driven by short-term institutional investors, while the presence of long-term institutional investors has a negative effect on stock price crash risk. In addition, we find that the presence of short-term institutional investors induces corporate risk-taking behavior. Our results are robust to alternative model specifications, endogeneity concerns, and different measures of crash risk and proxies of investors’ horizons.

Publication type: 
Scientific Article
Date de parution: 
Journal of International Financial Markets, Institutions and Money