Does US Financial Crisis Influence the Relationship between Ownership Holding and Stock Performance? The Case of a Developing Economy

This study investigates the influence of the US financial crisis on the relationship between ownership holdings and stock performance by assessing asymmetries in the effects of insider and institutional ownership before, during and after the US financial crisis. This study considers NIFTY 500–listed companies for a period of 16 years from 2002 to 2017, distinguishing between three economic phases: the pre-crisis (2002–2007), crisis (2008–2009) and post-crisis (2010–2017) periods. To test our hypothesis, we employ the panel data techniques of feasible generalised least squares and system generalized methods of moments to control the autocorrelation, heteroscedasticity and endogeneity issues. The findings reveal significant U-shaped and inverted U-shaped effects of insider ownership during the pre-crisis and post-crisis phases, respectively, which confirms the monitoring and expropriation effects of insiders. The favourable effect of domestic institutions during the crisis phase supports the notion of efficient monitoring during turbulent economic situations. The adverse effect of foreign institutions during the pre-crisis period implies either a conflict of interests or capital-gain motives via selling during the growth phase of the market economy. The time-variant effects of insider and institutional ownership are noted. Our findings are immensely significance for investors and executives for understanding the varied effects of insider and institutional owners with regard to their crisis management of an exogenous shock