Institutional Investors Heterogeneity And Earnings Management: The R&D Investment Strategy

This study examines the association between different institutional investors' ownershipand earnings management practice through R&D expenditures. It investigates thisrelationship for a sample of 123 US firms. We examine also the effect of institutionalownership on earnings management of firms having different information environment(S&P 500 versus non S&P 500). Results show that while investment funds exacerbateearnings management by encouraging managers to limit R & D expenditures, pensionfunds and banks follow passive behaviors. Moreover, the hypothesis of the relevance ofthe environment information in the explanation of the institutional investors’ behaviorseems to be important in our case.