This research aimed to investigate the effect of institutional ownership on the relationship between political connections of firms and stock prices crash risk. In addition to, investigate the conditionality of the mediating role of agency costs in explaining the relationship between the political connections of firms and stock prices crash risk on institutional ownership; (as a moderator variable). Using a series of balanced data, the research was applied on a purposive sample of (134) firms listed in the Egyptian Stock Exchange, with a total of (921) observations, during the period from 2014 to 2020. The researcher depended on moderated mediation model in application of the Path Analysis methodology. The results indicated that, there was a significant and negative effect of institutional ownership on the relationship between political connections of firms and stock prices crash risk, which reflected the importance of the monitoring role of institutional ownership, especially in firms with political connections. In order to reduce behavior of hoarding bad news and negative accounting information about owners or shareholders, and then reducing the opacity of financial reports, which support the information-increasing hypothesis as a result of the interaction of the political connections of firms with the increase in institutional ownership. Reflected in a future decrease in both, excessive evaluation of firms’ stock prices and stock prices crash risk. However, the results indicated the significance of the indirect relationship between the political connections of firms and stock prices crash risk, through meditating agency costs; depended on institutional ownership (as a moderator variable). This reflected the role of agency costs (as a mediating variable) as one of the channels that could be transmitted the effect of the political connections of firms on stock prices crash risk through it. The mediating effect of agency costs depended on institutional ownership; because the interaction between institutional ownership and political connections of firms reduced agency costs, which reflected positively on reducing stock prices crash risk.