Information Advantages of Large Institutional Owners

Strategic Management Journal, Vol. 29, pp. 219-227, 2008

9 Pages Posted: 5 Feb 2008

See all articles by Karen Schnatterly

Karen Schnatterly

Virginia Tech; University of Missouri-Columbia

Kenneth W. Shaw

University of Missouri at Columbia - School of Accountancy

William W. Jennings

U.S. Air Force Academy - Department of Management

Abstract

We study the relation between the percentage of outstanding shares held by a firm's largest institutional owner and the bid-ask spread on that firm's shares, a measure of information risk. We find that the greater the percentage of shares held by the largest institutional investor, the greater the bid-ask spread in share prices. In contrast, the percentage of shares held by smaller institutional owners is related to lower bid-ask spreads. The results imply that only the largest of a firm's institutional owners - and no other institutional owner - is perceived to hold an information advantage.

Keywords: institutional owners, monitoring, ownership concentration, information, bid-ask spread

JEL Classification: G12, G14, G2

Suggested Citation

Schnatterly, Karen and Shaw, Kenneth W. and Jennings, William W., Information Advantages of Large Institutional Owners. Strategic Management Journal, Vol. 29, pp. 219-227, 2008, Available at SSRN: https://ssrn.com/abstract=1089644

Karen Schnatterly (Contact Author)

Virginia Tech ( email )

Blacksburg, VA 24061
United States

University of Missouri-Columbia ( email )

332 Cornell Hall
Columbia, MO Columbia 65211
United States

Kenneth W. Shaw

University of Missouri at Columbia - School of Accountancy ( email )

420 Cornell Hall
Columbia, MO 65211
United States
573-882-5939 (Phone)
573-882-2437 (Fax)

William W. Jennings

U.S. Air Force Academy - Department of Management ( email )

2354 Fairchild Drive
Suite 6H-94
Academy, CO 80840-2944
United States

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