We study the relation between the percentage of outstanding shares held by a firm's largest institutional owner and the bid–ask spread on that firm's shares, a measure of information risk. We find that the greater the percentage of shares held by the largest institutional investor, the greater the bid–ask spread in share prices. In contrast, the percentage of shares held by smaller institutional owners is related to lower bid–ask spreads. The results imply that only the largest of a firm's institutional owners—and no other institutional owner—is perceived to hold an information advantage. Copyright © 2007 John Wiley & Sons, Ltd.