Impact of Institutional Ownership on Firm Value in Pakistan

Abstract

The relationship between institutional ownership and firm value is a complex and multi faceted topic. While some studies suggest a positive relationship, others find no significant effect or highlight the mediating role of other factors. This research focuses on the relationship between institutional ownership and firm value in non-financial and non utilities publicly listed companies in Pakistan between 2008 and 2018. Using Tobins-Q as a proxy for firm value, and foreign institutional ownership and domestic institutional ownership as independent variables alongside a number of control variables, this research finds a negatively significant relationship between firm value and institutional ownership. As a second research question, the research also finds that this result is primarily driven by domestic institutional ownership, as foreign institutional ownership has positive but insignificant relationship with firm value.