Board Independence, Ownership Concentration, and Profitability of Listed Firms in Mexico and Chile

Abstract

This paper examines the effect of Board independence on the profitability of non-financial companies listed in Mexico and Chile from 2009 to 2016. It examines the impact on financial performance of the percentage of independent Board members and their tenure, which is evaluated considering ownership concentration. Based on dynamic panel models, the study concludes that the degree of independence does not favor business results, regardless of the concentration of ownership. However, the tenure of independent directors does have a negative impact on the performance of these firms. The results obtained question the legal requirements related to corporate governance for the companies listed in Latin America and suggest empirical lines of research that encourage identifying effective checks and balances for these companies.