Institutional ownership and earnings management: Evidence from India

The present study analyzes and assesses the robustness of monitoring effectiveness institutional investment against information asymmetry prevailing in market, especially asymmetric Domestic Institutional Investment (DII) vis-à-vis Foreign (FII). Drawing from a sample listed non-financial firms with 20% or more, this tests relationship between earnings management ownership controlling for known firm-specific variables. results reveal that aggregate as well DII FII have significant negative impact on supporting active hypothesis. also support hometown advantage hypothesis sub-group companies higher Price to Book Value (PBV) global investor lower PBV ratio. Various implications applicable Indian markets contexts are discussed. investors should improve their cost-effective technology acquire process price-sensitive which can enhance competitive over foreign counterparts. This is one among first few studies market shows not uniform across they invest. Another contribution extant literature India analysis using alternative definitions management, incorporating industry-specific time-specific factors estimation discretionary accruals.