ABSTRACT
In this study we evaluated the effects of institutional investor participation on two aspects of capital market efficiency, namely price lead earnings and earnings quality, measured according to the theoretical framework proposed by Jiambalvo, Rajgopal, and Venkatachalam (2002) and Dechow and Dichev (2002) and modified by Jones, Krishnan, and Melendrez (2008). The sample consists of nonfinancial organizations listed on stock markets in France, Germany, Italy, The Netherlands, Spain, Switzerland, the U.K., and the U.S. between 2004 and 2013. The results indicate that the effect of institutional investor participation on price lead earnings and earnings quality is market specific. In civil law and low anti-director rights index countries, institutional investors have an information advantage over individual investors, and institutional investor participation is associated with higher earnings quality.
