Institutional ownership and stock liquidity during the COVID-19 crisis: a global perspective

Purpose - This paper aims to examine the relationship between institutional ownership and stock liquidity during the economic crisis triggered by the COVID-19 pandemic. Design/methodology/approach - We analyze a sample of 37,870 non-financial publicly listed firms from 39 countries over the period 2010–2020. To capture potential differences between economic conditions, the sample is divided into two periods: the pre-COVID-19 (non-crisis) period and the COVID-19 crisis period. Findings - Our findings indicate that institutional ownership has a positive impact on stock liquidity, even during the adverse economic conditions triggered by COVID-19. However, the positive association between institutional ownership and stock liquidity is attenuated during the COVID-19 crisis, mirroring results observed during the October 19, 1987, stock market crash (Amihudet al., 1990). Further analyses reveal that the effect of institutional holdings on stock liquidity is more pronounced in countries less affected by COVID-19. Additionally, the positive impact of institutional ownership on stock liquidity is weaker in countries with stronger institutional environments and more robust in those with weaker institutional frameworks. Originality/value - This study represents the first comprehensive exploration of how the COVID-19 crisis has influenced the relationship between institutional ownership and stock liquidity within an international context. By examining this association across diverse markets, the study aims to shed light on the dynamic interplay between institutional investors and stock liquidity during one of the most disruptive global events in modern financial history.