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Prior literature finds that earnings management is negatively correlated with institutional ownership. The question is whether institutional investors drive down earnings management of the firms they invest in, or they choose firms with lower earnings management. In this paper, we use the instrument variable design of the Russell 1000 and 2000 indices reconstruction to obtain an exogenous variation in institutional ownership. We find that institutional investors do not drive down earningsdoi:10.3390/businesses1030012 fatcat:5wcemgct3jb6bke4j5vzow5i6u