HOW CONTROLLING SHAREHOLDERS PLAY THEIR DECISIVE ROLES IN CORPORATE SOCIAL INVESTMENTS: A CASE STUDY OF PAKISTAN

This study examines the role of controlling shareholders in determining the level of corporate social responsibility (CSR) investments. The data was collected from Pakistani listed firms and analysed using the panel regression technique. The results revealed that controlling shareholders have direct and nonlinear relationships (U-shaped) with social investments. The U-shaped relationship indicates that CSR investments decrease at lower levels of shareholders and increase when controlling shareholders own more shares. Subsequently, controlling shareholders may be risk-averse or consciously keep lower level of CSR investments while owning less shares. However, CSR investments may later increase as controlling shareholders own more shares for reputation and survivability concerns. The findings are useful for managers and policymakers to explore the impact of main corporate governance actors (i.e., controlling shareholders) towards CSR investments. It offers guidelines for managers, minority shareholders, and the government regarding CSR investments and whether controlling shareholders will align or contradict these endeavours. The study also extends the theoretical boundaries of the agency theory and reference point for developing economies with weak governance mechanisms and poor investor protection.