Since the opening of the capital market in 1992, foreign investors and domestic institutional investors have occupied an important share in the Korean securities market. Prior domestic and international studies report through surveys that the quality of accounting earnings is usefully employed in the investment decision-making of professional investors such as financial analysts, credit analysts, and institutional investors. Furthermore, since the capital market opening, the sensitivity of stock returns to earnings changes has increased across the market as a whole. If foreign and domestic institutional investors conduct qualitative analysis of accounting earnings in their investment decision-making, the quality of accounting earnings of firms in which these professional investors invest may systematically differ from that of firms in which they do not invest. This study examines the relationship between foreign and domestic institutional investment and earnings quality. The empirical results indicate that foreign investors conduct qualitative analysis of accounting earnings in their analysis of investee firms and prefer firms with qualitatively superior accounting earnings. However, domestic institutional investors generally do not appear to place significant importance on the qualitative level of accounting earnings in selecting investee firms. After controlling for determinants of the earnings response coefficient, significant relationships were found between some variables measuring accounting earnings quality and the earnings response coefficient. Both foreign ownership and domestic institutional ownership also showed a positive relationship with the earnings response coefficient. This implies that the increase in earnings response coefficients across the market since the capital market opening is only partially related to accounting earnings quality, and that professional investors have the ability to identify firms with high earnings-to-stock-price conversion rates. As foreign ownership increases, the earnings volatility of investee firms decreases and the cash conversion probability of accounting earnings increases. That is, foreign investors play a monitoring role over corporate management of investee firms, inducing qualitative improvement in accounting earnings. However, such positive effects are far less pronounced for domestic institutional investors.