Retail investor attention and stock return volatility: The moderating role of ownership concentration in China

We examine how ownership concentration (OC) moderates the relationship between retail investor attention and stock return volatility. We use the aggregate search frequency from the Baidu search index and the shareholding of the largest 10 shareholders as proxies for retail investor attention and OC. The empirical results show that a firm's OC is a critical moderator in mitigating the positive relationship between retail investor attention and stock return volatility. In addition, we find that lower trading volume and reduced financial risk‐taking constitute two key mechanisms underlying the moderating effect of OC. Furthermore, we find that the moderating role of OC is more pronounced for active shareholders, consistent with their monitoring incentives. Our results remain robust to alternative measures, Oster's omitted variable bias approach, the change‐in‐change regression, and the instrumental variable method. Given the importance of stock return volatility in corporate finance, our findings contribute to a deeper understanding of how retail investor behavior and OC jointly shape market dynamics. These insights also have important policy implications for facilitating market stability and protecting shareholder value.