This paper investigates whether institutional investors trade profitably around positive or negative earnings surprises. Using unique Korean data over the period of 2001-2010, we find that the trading volume decreases only before the negative events due to information asymmetry among investors. We also find that institutions sell their stock prior to negative earnings surprises whereas individual and foreign investors do not anticipate bad news. Hence, institutional trade imbalance is positively related to the announcement abnormal returns of the negative events. The evidence is consistent with our conjecture that domestic institutions exploit their superior information around the negative earnings surprises.