Corporate Social Responsibility in Latin American firms: Exploring the interrelationships between financial constraints, corporate governance and financial performance

Abstract

The aim of this dissertation is to explore corporate social responsibility (CSR) among Latin American firms. Our main objectives are: 1) to understand the relationship between CSR and corporate financial performance (CFP), and the potential influence of the contextual conditions of Latin America; 2) to examine the connection between financial constraints and CSR investment in Latin American firms; and 3) to analyse the relationship between corporate governance (CG) and CSR and CFP in Latin American firms. Through a comprehensive review of meta-analysis studies regarding the CSR-CFP relationship, we discover a gap regarding coverage for Latin American firms in the literature. This study is the first to explore the relationship between financial constraints and CSR in Latin America, using a sample of 134 firms for the 2009-2015 period. We measure CSR through Thomson Reuters ASSET4 equal-weighted ratings. To measure financial constraints we use the Kaplan-Zingales (KZ) Index and the Hadlock-Pierce (SA) index. Our empirical analysis provides evidence of a negative relationship between financial constraints and CSR, consistent across the different countries and industries in the sample. If Latin American firms are already constricted in their access to funds, what would be the best resource allocation between social, environmental and CG strategies when looking to improve corporate performance? Using our previous sample of Latin American firms, we evaluate whether CSR and CG mechanisms can complement/substitute each other. We measure CG through ThomsonReuters Management Category Score, which has not been used in previous research due to its recent addition in 2018. We also address institutional differences for this region through country-level CG variables, Thus, our study becomes also the first to explore both levels of CG mechanisms for Latin American firms. We find that social activities and CG mechanisms function as substitutes, while environmental activities are actually complementary with CG strategies when looking to improve CFP in Latin American firms.

Date of Award	25 Sept 2020
Original language	English
Awarding Institution	The University of Manchester
Supervisor	Paul Dewick (Supervisor) & Marie Dutordoir (Supervisor)