Institutional Ownership, Information and Liquidity

Innovations in Investments and Corporate Finance, Vol. 7, pp. 41-71, 2002

31 Pages Posted: 19 Mar 1997 Last revised: 19 Jun 2010

See all articles by William W. Jennings

William W. Jennings

U.S. Air Force Academy - Department of Management

Karen Schnatterly

Virginia Tech; University of Missouri-Columbia

Paul J. Seguin

University of Minnesota - Twin Cities - Carlson School of Management

Multiple version iconThere are 2 versions of this paper

Abstract

We examine relations between institutional ownership and quoted bid-ask spreads in general, and the adverse-selection component of the spread in particular. For our sample of Nasdaq stocks, we find that high institutional ownership leads to narrower spreads and spreads with a smaller proportion attributable to asymmetric information. Our results are not attributable to institutions' preferences for liquid securities. The relation between spreads and institutional ownership varies significantly across institutional type and is related to the largest block size held by an institution. Our evidence suggests that increases in institutional ownership reduce the costs of liquidity services by ameliorating informational asymmetries.

Keywords: institutional owners, information, ownership structure

JEL Classification: G12, G14, G32, G20

Suggested Citation

Jennings, William W. and Schnatterly, Karen and Seguin, Paul J., Institutional Ownership, Information and Liquidity. Innovations in Investments and Corporate Finance, Vol. 7, pp. 41-71, 2002, Available at SSRN: https://ssrn.com/abstract=8197

William W. Jennings

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

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

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

Paul J. Seguin

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States
(612) 626-7861 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
218
Abstract Views
2,420
rank
167,758
PlumX Metrics