Understanding board designs in Latin American firms: Insights from Brazil

Abstract

Firms are facing an increasing pressure to conform to a globally-accepted good governance norm that is largely based on developing economies in order to increase board monitoring. However, many Latin American firms deviate from a set of recommended corporate governance practices by adopting board designs with practices associated with low board monitoring. We attribute this deviation to the interplay of capacity and willingness to bear the high costs of board designs with few barriers to board monitoring. In this study, we use a configurational approach to inductively identify the board designs of publicly listed Brazilian firms. Our findings uncover a typology of board designs corresponding to particular levels of firms’ capacity and willingness to bear the costs of board governance practices that conform to the good governance norm. We discuss our study’s implications for strategic corporate governance.