Abstract: Based on data from China’s A-share market between 2007 and 2022, this study utilizes the SJC Copula to measure tail systemic risk and constructs an institutional investor “distraction” index using extreme industry returns. We find that distraction significantly reduces firm-level tail systemic risk, primarily through mechanisms that inhibit herding behavior and enhance stock liquidity. Heterogeneity analysis reveals that this effect is more pronounced among pressure-resistant institutions, during periods of negative external shocks, and in firms that do not disclose social responsibility reports. Our findings contribute to understanding institutional behavior’s role in market stability and macroprudential regulation.

Key words: institutional investor distraction, tail systemic risk, herding behavior