Investigation of the Effect of Profitability, Institutional Ownership and Effective Tax Rate on Social Responsibility of Automobile Manufacturing Companies Listed in Tehran Stock Exchange

Abstract

Today, the impact of social responsibility on financial situation of companies has been proven. This effect varies depending on the community where the company is located and how the company looks at it. In the meantime, the community's viewpoint of the company is of great importance, because companies that do not observe the principles and social rights of the shareholders (such as no harm to the environment, employee salaries, and government rights, such as tax payments) may have problems with investors’ willingness to invest. This issue among automobile companies can be of great importance due to the large number of employees and the possibility of environment pollution of the industry. Accordingly, the purpose of this study is to investigate the effect of profitability, institutional ownership and effective tax rate on social responsibility of car manufacturing companies in the Tehran Stock Exchange.The statistical population of the study consisted of a sample of 20 active companies in the automobile industry and automotive parts manufacturing in Tehran Stock Exchange during the period of 1385(2006) to 1394(2015). To assess social responsibility, Carroll model and voluntary responsibility, ethical responsibility, and economic responsibility indicators were used and the final score of each company's liability was calculated using the data envelopment analysis method. Data analysis was performed using panel regression and the econometric software Eviews 10.The results showed that institutional ownership has no significant effect on corporate social responsibility. The effective tax rate has a positive and significant impact on corporate social responsibility. Profitability has a positive and significant impact on corporate social responsibility.

Keywords: China Effective Tax Rate, Social Responsibility, Profitability, Automotive Industry