Institutional ownership and earnings quality: Evidence from China

We examine the impact of institutional ownership on earnings quality in China. We have employed two proxies of earnings quality: discretionary accruals and real earnings management. Using 19,743 firm-year observations from 2009 to 2017, we find that firms with higher institutional ownership are more likely to display higher earnings quality in lower discretionary accruals and lesser real activities manipulation. Our results are robust after controlling for endogeneity.