Corporate Governance and Its Effect on Productivity under Different Business Environments: Evidence from Latin America

32 Pages Posted: 20 Jul 2017

See all articles by Sandra Constanza Gaitan Riaño

Sandra Constanza Gaitan Riaño

Universidad EAFIT - School of Economics and Finance - Center for Research in Economic & Finance (CIEF)

Hernan Herrera-Echeverry

Universidad EAFIT - School of Economics and Finance - Center for Research in Economic & Finance (CIEF)

Eduardo Pablo

Minnesota State University Moorhead

Date Written: July 16, 2017

Abstract

We study the relationship between corporate governance and productivity in non-financial publicly traded firms based in Latin America. Using a sample of 670 firm-year observations during the period 2006-2014, we show that board size, gender diversity, institutional ownership, and the presence of independent directors, affect firms’ productivity. We find a statistically significant nonlinear relationship between board size and productivity. Institutional ownership has a positive effect on productivity. Board independence has a negative effect on productivity. However, when controlling for the country’s business friendliness and institutional ownership, the relationship between the level of board independence and productivity turns positive and statistically significant. Finally, a higher proportion of female directors relates negatively to productivity. This latter result adds to the puzzling mixed evidence about the effect of gender diversity on performance, in this case, on productivity.

Keywords: Productivity, Corporate Governance, Board of Directors, Country Environment

JEL Classification: G34, G32, G38

Suggested Citation

Gaitan Riaño, Sandra Constanza and Herrera-Echeverry, Hernan and Pablo, Eduardo, Corporate Governance and Its Effect on Productivity under Different Business Environments: Evidence from Latin America (July 16, 2017). Available at SSRN: https://ssrn.com/abstract=3003627 or http://dx.doi.org/10.2139/ssrn.3003627

Sandra Constanza Gaitan Riaño

Universidad EAFIT - School of Economics and Finance - Center for Research in Economic & Finance (CIEF) ( email )

Carrera 49 No. 7 South - 50
Bogotá
Colombia

Hernan Herrera-Echeverry

Universidad EAFIT - School of Economics and Finance - Center for Research in Economic & Finance (CIEF) ( email )

Carrera 49 No. 7 South - 50
Bogotá
Colombia

Eduardo Pablo (Contact Author)

Minnesota State University Moorhead ( email )

Moorhead, MN 56563
United States
218-4774655 (Phone)

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