Graduation Semester and Year
Summer 2024
Language
English
Document Type
Dissertation
Degree Name
Doctor of Philosophy in Business Administration
Department
Finance
First Advisor
Grace Hao
Second Advisor
Salil Sarkar
Third Advisor
David Rakowski
Fourth Advisor
Mahmut Yasar
Abstract
My dissertation explores two main themes: institutional investors' investment decisions and stock price crash risk. The first essay analyzes how institutional investors manage their portfolios in the context of economic policy uncertainty. The second essay examines the effect of employee ownership on a firm's stock price crash risk, while the third essay investigates how the concentration of institutional ownership affects the stock price crash risk.
My first essay investigates the impact of economic policy uncertainty on institutional investors’ holdings of common stocks. Using a large sample of quarterly institutional ownership data from 28 countries/markets between 2000 and 2021, I find that economic policy uncertainty negatively affects institutional investments in both domestic and overseas stock markets. Policy uncertainty also deters foreign institutions’ inbound investments. The adverse effect of policy uncertainty on cross-border institutional investment is particularly pronounced when the investment destination country does not share the same official language or legal origin as the investing country, consistent with the information asymmetry hypothesis. Additionally, firms with higher cash holdings and lower market-to-book ratios are less vulnerable to the withdrawal of investment by foreign institutional investors.
My second essay investigates the impact of employee ownership on the stock price crash risk. Prior research shows mixed evidence of employee ownership’s effect on the firm’s stock performance. Using data from U.S. public firms from 2001-2022, I find that employee ownership is positively associated with future stock price crash risk. Additionally, the positive impact of employee ownership on stock price crash risk is stronger in firms with poorer corporate governance, less external monitoring, and higher levels of information asymmetry.
My third essay examines how institutional ownership concentration affects firms’ stock price crash risk on a global scale. Existing literature indicates that institutional ownership concentration can be either positively or negatively related to institutional monitoring, thereby influencing managers' incentives and ability to withhold negative information. Using a sample of listed firms from 63 countries over the period 2001-2021, I find that firms with higher institutional ownership concentration are less prone to stock price crashes. The negative effect of institutional ownership concentration on stock price crash risk is especially pronounced for foreign institutional investors, independent institutional investors, and countries with poor information disclosure requirements.
Keywords
economic policy uncertainty, ownership structure, stock price crash risk
Disciplines
Corporate Finance | Finance and Financial Management
License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Recommended Citation
Li, Andi, "Three Essays on Investment Decisions and Stock Price Crash Risk" (2024). Finance and Real Estate Dissertations. 43.
https://mavmatrix.uta.edu/financerealestate_dissertations/43