Institutional ownership and the quality of earnings

This study is designed to provide insights into the monitoring role of institutional investors by examining whether institutional ownership affects the quality of reported earnings. In addressing this issue, we develop a multidimensional method of measuring earnings quality using the Financial Accounting Standards Board's (FASB) conceptual framework as a basis. The results demonstrate significant evidence of a positive association between institutional ownership and earnings quality. In addition, the results indicate that concentrated institutional ownership may negatively affect earnings quality.