Resumo

Prior research has examined the impact of corporate philanthropy on firm financial performance in terms of diverse contexts, including developed countries, emerging-market countries, and industry context. Nevertheless, the Latin American context has received little attention from researchers regarding the relationship between corporate governance and corporate philanthropy. Given the extent of family control of firms and the influence of government in the region, Latin American firms likely behave in ways that differ from their developed-country counterparts.

How does corporate governance influence corporate philanthropy in Latin America? How does the institutional context influence corporate philanthropy in Latin America?

We begin by examining the relationship of three standard corporate governance variables to corporate philanthropy (independent directors, women directors, and board size). These base hypotheses build from the extant literature, which we then place in the context of Latin America. We then introduce a key feature of institutional context – philanthropic freedom – to understand the impact of the institutional context on corporate philanthropy.

The dependent, independent, and control variables were collected from the Bloomberg database. Although Bloomberg covers 1,806 Latin American publicly traded companies, only 306 have Environmental, Social and Governance (ESG) data. Due to missing values among these firms, we were left with a sample of 151 companies with ESG data for four years (2012-2015), totaling 604 observations. Our dependent variable was the intensity of corporate philanthropy. For the independent variables we used the (a) independent directors, (b) women on the board, and (c) board size.

Surprisingly, women directors have a negative effect, contrary to our initial hypothesis, which suggested that women would favor community investment. One possible explanation is that culture trumps gender. In the highly masculine countries of Latin America (Hofstede & Bond, 1984), a concern with material well-being characterizes women as well as men. Given the poverty that characterizes the region, women directors may be more concerned about the economic success of firms, which provide jobs, rather than community investment.

In summary, the picture of Latin America is a variegated one, in which it is impossible to portray the region as uniform. Rather, it appears that where the institutional context permits greater governmental effectiveness, corporate philanthropy depends less on the attributes of corporate governance of independent directors and board size. However, where the institutional context does control corruption, then corporate philanthropy does depend on corporate governance attributes of independent directors and board size.

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