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

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.