The Effect of Institutional Investors’ Distraction on Financial Statements Comparability

Abstract

The inattention or lack of institutional shareholders' attention as the weak monitoring mechanism and less demand for reliable reporting can affect the quality and comparability of information. Based on this, this research aims to investigate the effect of institutional investors’ distraction on the financial statements comparability of firms listed on the Tehran Stock Exchange. The test of research hypotheses with the data of 123 firms in the period of 2012-2021 using multiple regression models showed that the tendance of institutional shareholders causes an increase and deviation of institutional shareholders' attention causing a reduction of financial statements comparability respectively, The obtained result indicates that the deviation of the institutional shareholder's attention, neutralizes the supervisory power of institutional investors, weakens the results of corporate governance, strengthens the passive and opportunistic approach of management, and as a result, results in low reporting quality and less comparability of financial statements. In general, these findings are by the hypothesis of the personal interests of institutional shareholders.

Keywords

• institutional investors’ distraction
• financial statements comparability
• supervisory power
• agency theory