Corporate Ownership and Stock Price Volatility: An Empirical Study

Abstract

This paper investigates the relationship between the firm ownership structure and price volatility. Ownership structure consists of promoter holdings, public shareholdings, institutional and non institutional holdings. Selected 26 Information Technology firms sample was taken for the study and it is found that largest shareholder in this sector is promoter and promoter group, who hold more than 45% stake in the firm. Public shareholding is the second largest. Institutional and non institutional investors have less than 25% shareholdings. Volatility is measured using standard Deviation and GARCH (1,1) is used to check the volatility persistence. It is found that price volatility is not significantly influenced by the firm ownership structure. This agrees with the notion that the price volatility is largely influenced by external macro economic variables and speculative forces of the market and internal factors like leverage and ownership structure has no significant influence on stock price volatility.

Keywords: Ownership structure, volatility, GARCH, Promoter holdings

JEL category: G23, G21