Family Firms, Institutional Ownership, and Volatility of Stock Returns : An Indian Study

Authors

  •   Neha Nayanika Sahoo Research Scholar, School of Management, KIIT University, Patia, Bhubaneswar - 751 024, Odisha ORCID logo https://orcid.org/0009-0005-7058-9193
  •   Chandrabhanu Das Assistant Professor, School of Business, GITAM Deemed to be University, Hyderabad Campus, Rudraram, Patancheru, Sangareddy Dist. Telangana - 502 329 ORCID logo https://orcid.org/0000-0002-9896-1808
  •   Rajeev Sengupta Associate Professor, Faculty of School of Business, Dr. Vishwanath Karad MIT World Peace University, Pune - 411 038, Maharashtra ORCID logo https://orcid.org/0000-0001-7451-239X
  •   Brajaballav Kar Associate Professor (Corresponding Author), School of Management, KIIT University, Patia, Bhubaneswar - 751 024, Odisha. & Honorary Research Fellow, Shinawatra University, Thailand ORCID logo https://orcid.org/0000-0002-2127-1147

DOI:

https://doi.org/10.17010/pijom/2026/v19i8/174709

Keywords:

family business, institutions, promoter, stock return volatility, agency theory, panel data.
JEL Classification Codes :C51, G17, G23, G32, L22
Publishing Chronology: Paper Submission Date : September 5, 2025 ; Paper sent back for Revision : May 14, 2026 ; Paper Acceptance Date : June 5, 2026 ; Paper Published Online : August 17, 2026.

Abstract

Purpose : The prevalence of family firms and foreign institutional investors is a distinct feature of Indian business, often marked by conflicting ownership goals between dominant promoter and institutional ownership affecting resources, performance, governance, and risk. This study examined how dominant ownership and its interactions influenced stock return volatility in leading Indian family firms.

Design/Methodology/Approach : Family firms were curated from the Forbes list of India’s most valued companies. Using panel data econometrics, the study analyzed seven years of stock returns to examine how ownership structure affected volatility.

Findings : The study found that dominant promoter and institutional ownership reduced stock return volatility by signaling strong fundamentals, contrasted with prior findings that attributed volatility primarily to dominant ownership, firm-specific factors, and agency conflicts. Institutional ownership mitigated Type 2 agency risk through effective monitoring. Notably, firm-specific factors such as size, leverage, and stock turnover did not show statistically significant influence on volatility when dominant ownership levels increased. Overall, the characteristics of well-established Indian family firms and institutional investor ownership reduced volatility.

Practical Implications : In reputed family-controlled businesses, dominant ownership introduced potential agency conflicts, but its mitigation enhanced investor trust and supported more efficient portfolio optimization. Practitioners and academics could refine risk management strategies for firms with concentrated ownership structures in emerging markets. Future research could consider how governance practices moderate the relationship between ownership and volatility.

Originality/Value : The study adopted a unique approach based on Agency theory and the resource-based view. It segregated ownership structures and studied their impact on volatility.

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Published

2026-08-17

How to Cite

Sahoo, N. N., Das, C., Sengupta, R., & Kar, B. (2026). Family Firms, Institutional Ownership, and Volatility of Stock Returns : An Indian Study. Prabandhan: Indian Journal of Management, 19(8), 24–43. https://doi.org/10.17010/pijom/2026/v19i8/174709

Issue

Volume 19, Issue 8, August 2026

Section

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