We study the effect of institutional ownership on firm coverage by equity analysts. To account for the endogeneity of institutional ownership we employ instrumental variable approach. Acquisition for cash of a company from an institutional investor’s portfolio serves as an exogenous shock to the institutional ownership of other firms held by this institution. Contrary to prior studies, we document a negative effect of institutional ownership on analysts’ coverage. However, this effect varies with initial analysts’ following. Consistent with the theory of limited attention institutional ownership increases analysts’ following for companies with low initial coverage and decrease it for companies with high initial coverage. Overall, our findings highlight the role of company’s ownership structure in analysts’ decision to follow the firm.