Influence of foreign institutional holding on corporate risk-return profile: a panel quantile regression analysis

Figures & data

Figure 1. Nifty 50 index annual return (in %) is plotted against the foreign institutional investment in million US$.

Figure 2. India’s real GDP growth rate is plotted against the foreign institutional investment in million US$.

Table 1. Descriptive statistics of variables used in the study.

	CR1	CR2	FII	SIZE	LEVERAGE
Pre-Crisis Period
Mean	0.000	0.000	10.018	9.209	0.586
Median	−0.175	0.095	3.355	9.021	0.51
Std Dev	0.997	0.997	9.626	1.652	1.355
Skewness	1.94	−4.292	1.184	0.576	9.903
Kurtosis	13.625	38.111	1.395	3.337	141.636
Min	−2.423	−11.158	0	5.616	0
Max	10.035	3.219	44	14.132	26.29
VIF			1.24	1.21	1.05
Post-Crisis Period
Mean	0.000	0.000	12.055	10.643	0.344
Median	−0.159	−0.023	10.11	10.575	0.11
Std Dev	0.997	0.997	9.783	1.529	0.794
Skewness	0.599	−0.859	1.092	0.501	12.414
Kurtosis	16.167	25.5	1.39	0.214	242.665
Min	−11.844	−12.16	0	6.479	0
Max	7.834	8.659	68.27	16.087	19.9
VIF			1.21	1.21	1.01
Overall period
Mean	0.000	0.000	10.018	10.072	0.586
Median	−0.163	0.024	7.43	9.977	0.24
Std Dev	0.997	0.997	9.551	1.643	1.386
Skewness	1.105	−2.451	1.184	0.431	9.903
Kurtosis	12.733	33.508	1.395	0.146	141.636
Min	−11.844	−12.16	0	5.616	0
Max	10.035	8.659	68.27	16.087	26.29
VIF			1.31	1.28	1.03
Levin Lin and Chu unit root Test	−11.4004*	−12.7569*	−9.5723*	−30.5324*	−11.4346*
Durbin-Wu-Hausman test	2.116 (p = 0.146)	0.033 (p = 0.856)

*Indicates level of significance at 5% level. Durbin-Wu-Hausman test indicates test of endogeneity with null hypothesis that all variables are exogenous.

Table 2. Result of Mood’s Median test.

	CR1		CR2
Crisis	Pre	Post	Pre	Post
Median	−0.175	−0.159	0.096	−0.023
Z-Stat	2.078		−3.271
Prob	0.038**		0.001***

*Significant at 5% level of significance.

Table 3. Correlation matrix.

	CR1	CR2	FII	Size	Leverage
CR1	1
CR2	0.524*	1
FII	0.125*	0.139*	1
Size	−0.081*	0.026	0.465*	1
Leverage	−0.208*	−0.378*	−0.157	−0.038*	1

*Indicates 5% level of significance.

Table 4. Result of panel fixed effect model.

	CR1		CR2
Dependent variable	Coefficient	S.E	Coefficient	S.E
Const	1.442*	0.176	1.417*	0.173
FII	0.021*	0.003	0.010*	0.002
Size	−0.159*	0.018	−0.135*	0.018
Leverage	−0.086*	0.011	−0.256*	0.011
R-Squared	0.061		0.128
Prob F-Stat	0.000		0.000

*Indicates 5% level of significance.

Table 5. Results of panel fixed-effect model with crisis dummy variable using Eqs. (5)(5) $$\mathit{\text{CR}}{1}_{\mathit{\text{it}}}={\beta }_0+{\beta }_1\mathit{\text{FI}}{I}_{\mathit{\text{it}}}+{\beta }_2\mathit{\text{Siz}}{e}_{\mathit{\text{it}}}+{\beta }_3\mathit{\text{Leverag}}{e}_{\mathit{\text{it}}}+{\beta }_4\mathit{\text{Crisis}}+{\beta }_5\mathit{\text{Crisis}}\times {\mathit{\text{FII}}}_{\mathit{\text{it}}}+\epsilon$$(5) and (6)(6) $$\mathit{\text{CR}}{2}_{\mathit{\text{it}}}={\beta }_0+{\beta }_1\mathit{\text{FI}}{I}_{\mathit{\text{it}}}+{\beta }_2\mathit{\text{Leverag}}{e}_{\mathit{\text{it}}}+{\beta }_3\mathit{\text{Siz}}{e}_{\mathit{\text{it}}}+{\beta }_4\mathit{\text{Crisis}}+{\beta }_5\mathit{\text{Crisis}}\times {\mathit{\text{FII}}}_{\mathit{\text{it}}}+\epsilon$$(6) .

	CR1		CR2
	Coefficient	S.E	Coefficient	S.E
${\beta }_0$	2.318*	0.300	1.698*	0.295
${\beta }_1$	0.023*	0.002	0.014*	0.003
${\beta }_2$	−0.257*	0.030	−0.176*	0.033
${\beta }_3$	−0.111*	0.012	−0.178*	0.013
${\beta }_4$	0.192*	0.050	0.078	0.054
${\beta }_5$	−0.001	0.000	−0.001	0.000
R-Squared	0.0601		0.0703
Prob F-Stat	0.000*		0.000*

*Indicates significant at 5% level. ${\mathrm{\beta }}_5$ is the coefficient of interactive dummy variable.

Table 6. Panel quantile analysis of the impact FII on CR1 and CR2 after controlling for size and leverage.

Quantile	Regressor	Pre-crisis period		Post-crisis period		Overall period
		CR1	CR2	CR1	CR2	CR1	CR2
q10	FII	−0.001	−0.002	0.004*	0.007*	0.003	0.007*
		(0.003)	(0.015)	(0.002)	(0.002)	(0.002)	(0.002)
	Size	0.039*	0.094	0.028*	0.055*	0.028*	0.007
		(0.020)	(0.163)	(0.013)	(0.015)	(0.012)	(0.020)
	Leverage	−0.119*	−0.432	−0.146*	−0.861*	−0.093*	−0.485*
		(0.032)	(0.879)	(0.032)	(0.079)	0.014	(0.130)
q20	FII	0.004	−0.002	0.007*	0.009*	0.006*	0.007*
		(0.006)	(0.002)	(0.002)	(0.002)	(0.002)	(0.002)
	Size	0.019	0.051*	−0.029*	0.012*	−0.021*	−0.029
		(0.025)	(0.014)	(0.006)	(0.009)	(0.007)	(0.021)
	Leverage	−0.112*	−0.361*	−0.249*	−0.610*	0.118*	−0.344*
		(0.022)	(0.054)	(0.023)	(0.097)	(0.016)	(0.020)
q30	FII	0.009	−0.002	0.007*	0.007*	0.008*	0.005*
		(0.007)	(0.002)	(0.001)	(0.002)	(0.002)	(0.002)
	Size	−0.028	0.038*	−0.048*	−0.002	−0.045*	−0.036
		(0.020)	(0.011)	(0.005)	(0.007)	(0.006)	(0.019)
	Leverage	−0.135*	−0.311*	−0.278*	−0.463*	0.154*	−0.304*
		(0.0264)	(0.012)	(0.031)	(0.073)	(0.026)	(0.043)
q40	FII	0.009	0.003	0.012*	0.008*	0.009*	0.002
		(0.006)	(0.002)	(0.002)	(0.002)	(0.002)	(0.002)
	Size	−0.048*	0.041*	−0.075*	−0.019*	−0.054*	−0.002
		(0.024)	(0.004)	(0.006)	(0.009)	(0.006)	(0.009)
	Leverage	−0.132*	−0.303*	−0.267*	−0.461*	−0.147*	−0.261*
		(0.046)	(0.008)	(0.046)	(0.059)	(0.025)	(0.027)
q50	FII	0.012(0.007)	0.004*(0.002)	0.015*(0.002)	0.007*(0.002)	0.017*(0.002)	0.004*(0.002)
	Size	−0.064*	0.028*	−0.102*	−0.016*	−0.105*	−0.006
		(0.023)	(0.002)	(0.007)	(0.024)	(0.008)	(0.009)
	Leverage	−0.146*	−0.246*	−0.289*	−0.377*	−0.158*	−0.240*
		(0.054)	(0.017)	(0.054)	(0.083)	(0.045)	(0.053)
q60	FII	0.019*	0.004	0.017*	0.009*	0.021*	0.007*
		(0.008)	(0.002)	(0.002)	(0.001)	(0.003)	(0.002)
	Size	−0.100*	0.029*	−0.122*	−0.027*	−0.126*	0.000
		(0.020)	(0.007)	(0.013)	(0.009)	(0.011)	(0.009)
	Leverage	−0.139*	−0.212*	−0.290*	−0.292	−0.148*	−0.171*
		(0.043)	(0.037)	(0.045)	(0.129)	(0.035)	(0.038)
q70	FII	0.034*	0.008*	0.020*	0.014*	0.024*	0.010*
		(0.007)	(0.002)	(0.002)	(0.002)	(0.003)	(0.002)
	Size	−0.109*	0.013	−0.137*	−0.038*	−0.138*	−0.010
		(0.017)	(0.009)	(0.015)	(0.011)	(0.012)	(0.008)
	Leverage	−0.126*	−0.153*	−0.291*	−0.224	−0.155*	−0.136*
		(0.059)	(0.046)	(0.065)	(0.071)	(0.048)	(0.042)
q80	FII	0.039*	0.012*	0.030*	0.019*	0.038*	0.017*
		(0.007)	(0.002)	(0.004)	(0.003)	(0.004)	(0.002)
	Size	−0.069*	0.006	−0.157*	−0.045*	−0.169*	−0.030*
		(0.026)	(0.013)	(0.029)	(0.009)	(0.020)	(0.010)
	Leverage	−0.124*	−0.120*	−0.292*	−0.162	−0.133*	−0.117*
		(0.042)	(0.006)	(0.143)	(0.148)	(0.038)	(0.011)
q90	FII	0.056*	0.014*	0.036*	0.022*	0.042*	0.022*
		(0.013)	(0.004)	(0.004)	(0.005)	(0.005)	(0.003)
	Size	−0.089*	−0.002	−0.197*	−0.110	−0.167*	−0.057*
		(0.034)	(0.027)	(0.027)	(0.023)	(0.030)	(0.019)
	Leverage	−0.071	−0.105*	−0.207*	−0.027	−0.120*	−0.092*
		(0.224)	(0.033)	(0.022)	(0.314)	(0.032)	(0.038)

*Indicates significance at 5% level. Standard error of the coefficients are presented in the brackets.

Figure 3. Impact of FII holding across the quantiles of CR1 and CR2.

Table 7. Panel quantile analysis of the impact FII on CR1 and CR2 after controlling for industry effect, liquidity, firm age, public holding, size and leverage.

Variables	q10		q20		q30		q40		q50		q60		q70		q80		q90
	CR1	CR2	CR1	CR2	CR1	CR2	CR1	CR2	CR1	CR2	CR1	CR2	CR1	CR2	CR1	CR2	CR1	CR2
FII	0.019*	0.010*	0.015*	0.008*	0.016*	0.006*	0.014*	0.007*	0.017*	0.008*	0.026*	0.011*	0.027*	0.013*	0.032*	0.017*	0.047*	0.025*
	−0.003	−0.003	−0.003	−0.002	−0.003	−0.002	−0.003	−0.002	−0.003	−0.002	−0.003	−0.002	−0.002	−0.003	−0.003	−0.003	−0.009	−0.005
Size	0.015	0.024	−0.012	0.013	−0.003	0.016*	−0.008	0.002	−0.031*	−0.009	−0.033*	−0.022*	−0.035*	−0.019*	−0.076*	−0.037*	−0.163*	−0.117*
	−0.018	−0.017	−0.016	−0.012	−0.012	−0.007	−0.013	−0.008	−0.015	−0.008	−0.01	−0.01	−0.009	−0.008	−0.012	−0.016	−0.028	−0.036
Leverage	−0.246*	−0.479*	−0.154*	−0.276	−0.151	−0.287*	−0.147*	−0.261	−0.128*	−0.179*	−0.13	−0.164*	−0.129*	−0.16	−0.104	−0.149*	−0.062	−0.099
	−0.065	−0.033	−0.032	−0.038	−0.031	−0.01	−0.025	−0.058	−0.012	−0.014	−0.012	−0.061	−0.017	−0.085	−0.093	−0.017	−0.039	−0.057
Liquidity	0.160*	0.06	0.163*	0.056	0.211	0.027	0.224*	0.022	0.269*	0.037	0.302*	0.046*	0.330*	0.042	0.403*	0.032	0.377*	−0.022
	−0.024	−0.023	−0.036	−0.033	−0.035	−0.021	−0.025	−0.034	−0.039	−0.024	−0.036	−0.023	−0.028	−0.028	−0.04	−0.032	−0.101	−0.031
Firm Age	0.009*	0.007*	0.006*	0.004*	0.006*	0.004*	0.006*	0.003*	0.005*	0.003*	0.005*	0.004*	0.005*	0.002*	0.006*	0.003*	0.009*	0.009*
	−0.002	−0.001	−0.001	−0.001	−0.001	−0.001	−0.001	−0.001	−0.001	−0.001	−0.001	−0.001	−0.001	−0.001	−0.001	−0.001	−0.002	−0.002
Public shareholding	−0.005*	−0.003*	−0.006*	−0.004*	−0.006*	−0.004*	−0.005*	−0.004	−0.006*	−0.005*	−0.007	−0.006*	−0.008*	−0.005*	−0.011*	−0.008*	−0.018*	−0.012*
	−0.002	−0.001	−0.001	−0.001	−0.001	−0.001	−0.001	−0.001	−0.001	−0.001	−0.001	−0.001	−0.002	−0.001	−0.001	−0.001	−0.003	−0.002
Construction	−0.194*	−0.202*	−0.261*	−0.252*	−0.330*	−0.273*	−.438*	−0.265	−0.456*	−0.361*	−0.576*	−0.378*	−0.736*	−0.421*	−0.965*	−0.510*	−0.858*	−0.491*
	−0.095	−0.047	−0.065	−0.058	−0.054	−0.052	−0.064	−0.062	−0.073	−0.084	−0.092	−0.097	−0.113	−0.101	−0.103	−0.126	−0.161	−0.142
Oil	0.046	0.013	0.027	−0.029	−0.066	−0.051	−0.143*	−0.038	−0.164*	−0.123	−0.249*	−0.164*	−0.593*	−0.240*	−0.596*	−0.367*	−0.604*	−0.356*
	−0.123	−0.049	−0.067	−0.047	−0.055	−0.044	−0.062	−0.056	−0.066	−0.075	−0.08	−0.08	−0.057	−0.052	−0.052	−0.075	−0.131	−0.124
Services	−0.315*	−0.310*	−0.282	−0.209*	−0.272	−0.202*	−0.381*	−0.136	−0.324*	−0.275*	−0.392*	−0.332*	−0.553*	−0.366*	−0.552*	−0.387*	−0.384*	−0.342*
	−0.093	−0.114	−0.072	−0.078	−0.054	−0.054	−0.07	−0.066	−0.097	−0.095	−0.111	−0.104	−0.077	−0.084	−0.09	−0.11	−0.141	−0.129

*Indicates significance at 5% level. Construction, oil, and services are dummy variables (i.e., 1 for firms belonging to these industries, otherwise 0). The first and second row corresponding to each independent variable represent value of coefficients and their respective standard error. Size, leverage, liquidity, firm age, and public shareholding are control variables.

Figure 4. Impact of FII holding across the quantiles of CR1 and CR2 after controlling for size, liquidity, age, leverage, public shareholding and industry effect.

Table 8. Panel quantile analysis of the impact FII on EBIT_Sales and EBIT_Asset as a proxy for business risk and EPRatio as proxy for financial risk after controlling for industry effect, liquidity, firm age, public holding, size and leverage.

Variables	q10			q20			q30
	EBIT_Sales	EBIT_Asset	EPRatio	EBIT_Sales	EBIT_Asset	EPRatio	EBIT_Sales	EBIT_Asset	EPRatio
FII	0.012*	0.015*	0.003	0.011*	0.014*	−0.003*	0.010*	0.014*	−0.005*
Size	0.000	−0.014	0.038*	0.033*	−0.033*	0.022*	0.036*	−0.034*	0.022*
Leverage	−0.155	−0.082*	−0.404*	−0.111*	−0.090*	−0.236*	−0.067*	−0.082*	−0.207*
Liquidity	0.127*	0.118*	−0.013	0.153*	0.130*	−0.009	0.150*	0.152*	−0.006
Firm Age	0.001*	0.007*	0.000	−0.001	0.007*	−0.001*	−0.001	0.007*	−0.001*
Public Holding	0.000	−0.005*	−0.001	−0.002*	−0.006*	0.001*	−0.003*	−0.006*	0.002*
Construction	0.064	−0.292*	0.003	0.121*	−0.309*	0.028*	0.063	−0.310*	0.042*
Oil	0.115*	−0.037	−0.082	0.090*	−0.066	0.012	0.049	−0.069	0.026*
Services	−0.069	−0.314*	−0.023	−0.027	−0.341*	−0.019	0.004	−0.299	−0.018
Variables	q40			q50			q60
	EBIT_Sales	EBIT_Asset	EPRatio	EBIT_Sales	EBIT_Asset	EPRatio	EBIT_Sales	EBIT_Asset	EPRatio
FII	0.007*	0.011*	−0.006*	0.009*	0.012*	−0.007*	0.009*	0.015*	−0.008*
Size	0.039*	−0.015	0.020*	0.037*	−0.010	0.022*	0.033*	−0.035*	0.017*
Leverage	−0.057	−0.010*	−0.141*	−0.037*	−0.094*	−0.117*	−0.036*	−0.099*	−0.044*
Liquidity	0.163*	0.192*	−0.008	0.185*	0.221*	−0.008	0.211*	0.289*	−0.002
Firm Age	−0.001*	0.007*	−0.001*	−0.002*	0.006*	−0.002*	−0.002*	0.006*	−0.002
Public Holding	−0.002*	−0.005*	0.002*	−0.003*	−0.006*	0.002*	−0.001*	−0.007*	0.003*
Construction	0.061	−0.284*	0.059*	0.014	−0.341*	0.083*	−0.023	−0.436*	0.071*
Oil	0.047*	−0.062	0.037*	0.028	−0.091	0.042*	0.005	−0.190*	0.042*
Services	0.007	−0.231*	−0.004	0.026	−0.271*	0.019	0.015	−0.354*	0.020
Variables	q70			q80			q90
	EBIT_Sales	EBIT_Asset	EPRatio	EBIT_Sales	EBIT_Asset	EPRatio	EBIT_Sales	EBIT_Asset	EPRatio
FII	0.010*	0.023*	−0.010*	0.011*	0.025*	−0.014*	0.006*	0.034*	−0.021*
ize	0.054*	−0.048*	0.002*	0.063*	−0.110*	0.026*	0.104*	−0.180*	0.039
Leverage	−0.041*	−0.083	−0.045	−0.015	−0.071*	−0.013	−0.046	−0.047	−0.018
Liquidity	0.240*	0.330*	−0.009	0.335*	0.345*	−0.019	0.360*	0.376*	−0.022
Firm Age	−0.003*	0.006*	−0.002*	−0.005*	0.007*	−0.002*	−0.008*	0.011*	−0.003*
Public Holding	−0.001	−0.007*	0.004*	−0.001	−0.008*	0.005*	−0.001	−0.017*	0.009*
Construction	−0.019	−0.778*	0.069*	0.052	−0.914*	0.071	0.140	−1.062*	0.129*
Oil	−0.057	−0.402*	0.044*	−0.068*	−0.461*	0.041	−0.149*	−0.837*	0.050
Services	−0.001	−0.578*	0.035*	0.062	−0.640	0.074	0.501*	−0.926*	0.064

*Indicate significance at 5% level.

Figure 5. Impact of FII holding across the quantiles of EBIT/Asset, EBIT/Sales and EP Ratio after controlling for industry effect.