Author investigates whether firms with institutional ownership limit classification shifting. Classification shifting is new technique of earnings management wherein managers misclassify line items of income statement to present favorable operating performance. Core earnings expectation model (McVay in Account Rev 81:501–531, 2006) is adopted for measuring expense shifting. Regression model is employed to analyze whether ownership structure affects expense classification shifting in Indian Firms. It is found that firms with institutional ownership are engaged in expense misclassification to inflate core earnings of the firms. Investors should be more observant for the ownership structure of the firm. Regulators and Accounting Professional Bodies should provide for more mandatory disclosure in order to eliminate such misclassification practices. Auditors should also look in detail in financial statements for detecting CS activity, which is less likely to be detected as it does not impact bottom-line earnings of the firm. The paper provides the literature on expenses misclassification and presents the evidence that firms with institutional ownership are engaged in classification shifting.