'Institutional Ownership is the total number of shares owned by institutions divided by the total Shares Outstanding. Institutions are defined as financial organizations, pension funds or endowments. Large institutions who may have a large stake in the company can influence management.
This term is important since large institutions tend to have access to a large amount resources, expertise, information, and talent. If they chose to purchase a large stake in a company it signifies that they consider the company to be in relatively good standing. This acts as a indirect endorsement of the companies future success. In addition, a high institutional ownership means that the company will often be given suggestions, opinions, and pressure by those with a large stake to ensure the future success of the company.[1]
