The Effect of Distracted Institutional Investors on Socially Responsibility

According to the personal interest’s theory, if institutional shareholders neglect to perform their supervisory duties, due to this lack of attention, the management actions and decisions will not necessarily be in line with the interests of other interested groups, rather, the management prefers personal interests over doing activities that will avoid environmental and social effort. Accordingly, the aim of this research is to investigate the effect of distracted institutional investors on socially responsibility of companies admitted in the Tehran Stock Exchange. The results of test the research hypotheses with the data of 123 companies in the period of 2012-2021 using multiple regression models showed that institutional shareholders have caused an increase in social responsibility and distracted institutional investors has caused a decrease in the scope of social responsibility. The argument is that with the increase in the deviation of institutional shareholders' attention, monitoring on management actions has decreased, management's opportunistic behaviors and the pursuit of short-term goals have increased, and due to the lack of sufficient supervisory power, managers are not concerned about poor environmental performance, which reduces the scope of management's attention to the company's social responsibilities.