The Empirical Rearch On The Relationship Between Institutional Ownership And Earning Quality

Corporate control mechanisms include both internal mechanisms and external mechanisms. Outside shareholder monitoring is one of the external mechanisms. Among those outside shareholders, institutional investors have the resources and incentives to monitor and influence management decisions. Present researches report that institutional investors could constrain the self-serving behavior of corporate managers, and help improve governance.This study investigates both the linear and nonlinear relation between institutional ownership and earning quality, using cross-sectional expanding Jones model.The paper demonstrates that there is statistically significant nonlinear relationship exists between institutional ownership and the quality of accruals according to sample 2004-2006. However, the result according to sample 2007-2009 doesn't any significant relationship between institutional ownership and the earning quality.