Homework answers / question archive / Received: 3 August 2020 Revised: 6 October 2020 Accepted: 19 October 2020 DOI: 10

Received: 3 August 2020 Revised: 6 October 2020 Accepted: 19 October 2020 DOI: 10

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Received: 3 August 2020 Revised: 6 October 2020 Accepted: 19 October 2020 DOI: 10.1002/esr.2080 Check for updates RESEARCH ARTICLE Corporate Social Responsibility and Envisarental Management" WILEY The impact of board cultural diversity on a firm's commitment toward the sustainability issues of emerging countries: The mediating effect of a CSR committee Jennifer Martinez-Ferrero @ | M. Belen Lozano @ | Miguel Vivas Facultad de Economia y Empresa, Departamento Administracion y Econom Abstract la Empresa, Instituto Multidisciplinary de Empresa, Universidad de Salamanca, This study attempts to improve the understanding of how factors related to the Salamanca, Spain board of directors in emerging countries from America determine a firm's sustainabil Correspondence ity performance. This paper examines the effect of board cultural diversity and the Jennifer Martinez-Ferrero, Facultad de mediating effect of the existence of a corporate social responsibility (CSR) commit- Economia y Empresa, Departamento Administracion y Economia de la Empresa. tee. To test our objectives, we carried out a sample analysis on data gathered Instituto Multidisciplinarye Empresa, between 2012 and 2018 from a group of firms located in Argentina, Brazil, Chile and Universidad de Salamanca, 37007 Salamanca, Spain. Mexico. The results suggest that board cultural diversity promotes a firm's commit- Email: jenny_marfe@usales ment toward sustainability issues and leads to higher social and environmental per- formance. Moreover, the results show the mediating effect of the existence of a CSR committee, where a positive impact on sustainability performance appears to be linked to board cultural diversity. KEYWORDS board cultural diversity, CSR committee, emerging economies, ESG score, sustainability performance 1 | INTRODUCTION to the so-called corporate governance have acquired special relevance and interest in business and academia. In recent years, the importance of the so-called corporate social For example, Arora et al. have found an association between corpo- responsibility (CSR) has been attributed to the fact that it touches so rate governance and CSR, identifying a close relationship between both many areas, including issues such as the economic sustainability of a aspects. The central premise is that a suitable balance between social company, worker safety and the environment. However, the dynamic responsibility and company benefits requires a coordinated system for complexity of these issues makes it difficult to specifically define and both corporate governance and CSR commitment (Sundarasen, Je-Yen, & tackle CSR (Sheehy, 2015). According to Schwab (2008), CSR refers to Rajangam, 2015). Among the many possible mechanisms for corporate a company's role in addressing matters that will influence the world governance, the board of directors has been considered as one of the and that of future generations. These matters include the environ- main tools for ensuring social and environmental commitment (perfor- ment, poverty, social inequality, corruption and hunger, and it is mance and reporting) and that stakeholders' demands are met (Garcia- important to consider how companies adopt certain measure to effect Sanchez & Martinez-Ferrero, 2017). Therefore, it seems clear that its tively face these global challenges. structure and composition could encourage companies to fulfill their This importance, as well as the growing demand for CSR from a social obligations, since the board plays a fundamental role in guarantee- wide range of stakeholders, has not only increased the need for study- ing a firm's long-term commitment (Michelon & Parbonetti, 2012) ing the consequences of CSR (e.g., Martinez-Ferrero, Banerjee, & Several studies have described the association between board com- Garcia-Sanchez, 2016) but also its determinants. In this regard, institu- position and CSR in terms of board size, independence and diversity tional and industry-level factors within firms and those factors linked [Garcia-Sanchez & Martinez-Ferrero, 2017 Michelon & Parbonetti, 2012).

Carposole Social Responsibility and MARTINEZ-FERRERO ET AL. In addition, studies like those reported by Jo and Harjoto (2012), Lau, Lu, improve company achievements (Amini & Dal Bianco, 2017). Given that and Liang (2016) or Sinicropi and Cortese (2020) have clearly shown most recent research on CSR has focused on developed countries, we that board diversity has a positive effect on a firm's social responsibility. will look at the profiles of firms within the context of emerging markets. Moreover, there is a plethora of literature highlighting board gender Thus, this new and novel research sample contributes to what is diversity as a driver of CSR performance (e.g., Ferrero-Ferrero, already known about these emerging countries. Focusing on these Fernandez-Izquierdo, & Munoz-Torres, 2015]. Although cultural differ- countries is relevant for two specific reasons: on the one hand, the aim ences can also play a role, these differences have mainly been studied is to increase social awareness of the effect of CSR on the sustainable from the perspective of their impact on a firm's performance (Frijins, development of the economy and the improvement of poverty Dodd, & Cimerova, 2016) whereas their effects in terms of CSR have (Blowfield, 2005); and, on the other hand, to address the external and remained mainly unexplored. This has led us to examine how board internal pressures firms in developing countries face with regard to members originating from different cultural backgrounds behave with increasing their social and environmental commitment (Visser, 2008). respect to CSR issues. In this regard, this study focuses on the influence The remainder of this paper is organized as follows. Section 2 of board cultural diversity" on the social and environmental performance provides the theoretical background about the cultural issues in emer- of several companies. gent countries related to cultural diversity, sustainability commitment However, the above-mentioned studies do not take into account and CSR committee. Section 3 provides the data, main variables and that the impact of board diversity, in terms of gender, nationality and models; our empirical results are presented in Section 4, and Section 5 cultural differences, on CSR performance, which could be reliant on presents our conclusions. other types of factors. In this article, from among the possible contin- gent factors that determine the relationship between board diversity and CSR performance, we have chosen to focus on the existence of a 2 | THEORETICAL BACKGROUND: board of CSR committee, which is created with the aim of managing RESEARCH HYPOTHESES the opportunities and risks related to CSR, ensuring the achievement of corporate objectives and also satisfaction of the needs and 2.1 | Sustainability and cultural issues of emerging demands of the stakeholders (Peters & Romi, 2015). The reasons for countries this are clear, because the existence of a CSR committee can moder- ate the impact of board cultural diversity on CSR performance, since it Currently, many corporations attempt to establish long-term and sta- (a) ensures compliance with the stakeholders' demands related to sus- ble relationships with their stakeholders-efforts that ultimately con- tainability concerns (Peters & Romi, 2014); (b] it considers sustainable tribute to the sustainability of their growth. Visser (2008) considers development as a key strategic factor (Amran, Lee, & Devi, 2014); CSR in developing countries as "the formal and informal way in which and, (c) it is clearly related to greater CSR commitment in terms of a business makes a contribution to improving the governance, social, performance and reporting (Amran et al., 2014: Fuente, Garcia- ethical, labor and environmental conditions of the developing coun- Sanchez, & Lozano, 2017; Helfaya & Moussa, 2017). tries in which they operate, while remaining sensitive to prevailing The aim of this work is twofold as it has attempted to examine religious, historical and cultural contexts." the impact of board cultural diversity on CSR performance and to In this specific context, two different issues appear. First, the close- determine if this impact is reliant on the existence of a CSR committee knit relation between the socially responsible actions of corporations in and its mediating effects. developing countries, operating in a specific area, and the sustainable To address this, we examined 702 firm-year observations development of their environments becomes increasingly important, as between 2012 and 2018 taken from four different emerging coun- social and economic developments in these countries are often neces- tries: Chile, Argentina, Brazil and Mexico. By using the mediating pro- sary. Second, CSR programmes must be able to adapt to the specific cess proposed by Baron and Kenny (1986], we found that our findings needs of a business environment, particularly in emerging countries. This support the idea that board cultural diversity has a positive effect on a occurs because CSR agendas are usually based on the concerns and firm's commitment toward higher sustainability issues located in these contexts of developed countries (Idemudia, 2011). Therefore, CSR Latin American countries. That is, higher board cultural diversity leads should focus on the lower tier of the economic pyramid with objectives to greater social and environmental performance. Moreover, another aimed at reducing the inequality gap (Prahalad & Hammond, 2002). of the central research questions of this paper is the examination of Up until now, the literature on CSR has focused primarily on leading the potential role of a CSR committee to mediate. In other words, the economies and developed countries, a situation that has ignored corpo positive impact of board cultural diversity on sustainability perfor- rate citizenship in developing countries, in which the impact of social mance is justified by the existence of a CSR committee. implications could be more significant (Ferrero-Ferrero et al., 2015; In addition, as one of the main contributions of this study, we Garcia-Sanchez & Martinez-Ferrero, 2017; Lau et al., 2016). One possible focus on assessing the implications of board composition (board cul- explanation for this could be that the need for investing social issues has tural diversity and the existence of a CSR committee) in firms located not yet been embraced by the majority of corporations located in emerg- within emerging economies, where implementing both corporate ing economies, who believe that this type of investment would not be governing practices (Arora & Sharma, 2016) and CSR programmes can viable and would lead to unnecessary costs (Amini & Dal Bianco, 2017).

MARTINEZ-FERRERO ET AL. Corporate Social Reportsbig and @ WILEY 3 Nevertheless, this trend is changing, and recent research high- board composition and how it effects the achievement of socially lights the socially responsible commitment of corporations in emerg- responsible behavior. ing economies, particularly in Asian po (Lau et al., 2016; As a result, two factors should be taken into account. First, regu- Munro, Arli, & Rundle-Thiele, 2018, Sahasranamam, Arya, & Sud, latory authorities often require that boards are more diverse, and, sec 2019), whereas not much is known about the er nomies in and, social pressures can force companies to increase their Latin America (Visser, 2008). However, the pressure on corporations commitment to certain issues, for instance, the environment to improve their CSR agendas in these eme omies is contin- (Visser, 2008). Moreover, a more diverse board is more likely to uously growing due to greater s is about the lack of understand and satisfy the demands of a wide range of stakeholders ppropriate strategies for achi le growth (Visser, 2008]. n corpora- tions from their stakeholders, which ulti y detracts from the points of vi cisions and can mportance of the actions of CSR (Amini & Dal Bianco, 2017). include members of different age groups, gender or ethnicity, occupa Jamali (2008) has shown that some companies of emerging economies tions and formal education (Galia & Zenou, 2012). A variety of differ ace more obstacles in establishing CSR strategies because ent types of people, with respect to visible and non-visible some stakeholders are not easily identifiable or available for esta- characteristics, send a strong message to stakeholders that a company blishing contact, they, therefore, lack attention from their community is open-minded (Miller & Triana, 2009). or their environment. The abilit end each interest group Previously published literature on board diversity has mostly s extremely g in foreign markets, focused on gender, however, this concept also includes many other as is often the case in the study [Rottig. 2016) issues that are equally as important (Hillman, 2015). As a result, little In addition, the context in which a bu less operates is closely is known about how other va lated to the composition of a elated to cultural diversity and the ways in which governing bodies directing board, effect corporate ce in other types of areas make decisions. It is often challenging for th sponsible to bring (Ntim, 2015). In an attempt to bridge this gap in research, we have together the local and global reality surrounding a corporation's oper- focused this study on assessing cultural diversity on existing boards ations in a balanced way (Su "). Often the different of directors. Previous studies have analysed this, linking it to demands of each one of the lders and their implica- financial results (Carter, D'Souza, Simkins, & Simpson, 2010; Frijins tions with respect to the objectives established by the board must be et al., 2016), but the relationship between board diversity and CSR aken into account (Figar & Figar, 2011). mainly remains unexplored (Rao & Tilt, 2015). In the context of emerging economies in America, their govern- Thus, businesses, who associate their results with the achieve- ments are often incapable of basic conditions of education. ment of previously set goals, may decide to recruit board members healthcare and wealth for their citize situation that leads to private coming from different backgrounds and with different moral values corpor (Rao & Tilt, 2015). In a aimed at improving the quality of life of the local residents (Damiano- with different professional b unds obtained in other foreign Teixeira & Pom layer, 20071 Existing prob as corruption, countries is more likely to be more co mmitted to the implementation dishonest co orate actuations, lack of tr rency and a huge social of CSR measures (Lau et al., 2016). In addition, people from different and econom ship even more crucial ethnicities often have different als and values (Fitzsimmons, 2013) in emerging einy, 2006). Effective meaning that board decisions will fluenced by diverse ethical CSR agendas can result in greate principles and viewpoints. Fu ence of board direc e quality of general population (Aracil & Forcadell, 2018). Ofter orporate gover- CSR, as previous experien ices can provide gui ce when dealing with nance mechanisms, such as board independence or diversity, are used CSR issues within different markets (Katmon, Mohamad, Norwani, & to expand the spectrum of understanding that allows a clearer percep- Farooque, 2017) tion regarding the demands surrounding a particular company In American emerging economies, this subject becomes even (Raineri, 2018). Therefore, corporate governance, in general, and the more important. These countries are extremely rich in cultural diver board of directors, in particular, are of great importance in this matter sity. since their population descends from indigenous people (Harjoto, Laksmana, & Lee, 2014). European immigrants and African slaves among other races. A directing board, comprising peop le from multiple ethnic groups, may help to allow a better understanding of the minority groups 2.2 | Board cultural diversity and sustainability (Raineri, 2018). Taking all of the above into consideration and owing performance to the lack of information available, the following hypothesis is proposed: The environmentally sustainable actions of a company largely depend on the outlook taken by the board of directors ward CSR (O'Neill, H1 Board cultural diversity is proportional to the sustainability perfor- Saunders, & Mccarthy, 1989). Therefore, it is essential to analyse mance of firms in American emerging countries.

Corporate Social Responsibility and MARTINEZ-FERRERO ET AL. 2.3 | The mediating role of CSR committee 3 | METHOD As previously mentioned, the impact of board cultural diversity on 3.1 | Data CSR performance could be contingent on and explained by additional firm, institutional and industry-level factors. Among these factors, in To test the hypotheses proposed, we created a sample using the relation to board composition and structure, it is essential to examine information provided by Thomson Reuters Eikon following three the role played by the existence of a CSR committee. A CSR commit- steps. In the first step, we limit the sample to the universe of publicly tee is understood to be a board sub-commission comprised of mem- held companies in Latin America, Europe, Africa and Asia Pacific appe- bers with adequate experience and knowledge within the field. These aring on 31 stock market indices. The authors removed observations people are capable of presenting policies to the board, ensuring the with missing variable data, resulting in 79,880 firm-year observations. veracity of the information reported and monitoring and supervising In the second step, the sample is restricted to publicly listed firms the measures proposed (Fuente et al., 2017). in America, and, in particular, those located in emerging countries dur- According to Peters and Romi (2014), the main functions of a CSR ing 2012-2018. In this second step, and once we had removed dupli- committee are to ensure that established corporate objectives comply cated firm-year observations, the sample consisted of 2,072 firm-year with the expectations of the stakeholders are met and risks related with observations from Argentina, Brazil, Chile, Mexico, Panama, Puerto the sustainability of the corporate actions are managed. Moreover, the Rico and Uruguay." It should be noted that no information about CSR presence of a specific commission dedicated to CSR emphasizes corporate was available for Panama, Puerto Rico and Uruguay. involvement with sustainable development (Hussain, Rigoni, & Orj, 2016] In the third step, and because the CSR performance of firms is the and its commitment to the stakeholders, while considering corporate citi- central issue of this paper, we removed the firm-year observations that zenship a key strategic factor (Amran et al., 2014). This type of commission were missing information on CSR performance. After carrying out the helps the directing board to develop and implement programmes of social above-mentioned steps, the final sample consisted of 702 firm-year obser and environmental responsibility and, at the same time, improves the dis- vations from 2012 to 2018 from Argentina, Brazil, Chile and Mexico. closure of these types of programmes (Cucari, DeFalco, & Orlando, 2017). Table 1 reports sample distribution by year, country and industry. Previously published reports have shown a positive relation With respect to year, 2017 and 2018 were the years representing between corporative social commitment and the existence of a CSR almost 36%% of the observations. It is worth highlighting that, out of committee. Amran et al. (2014) and Helfaya and Moussa (2017) pre- the four emergent countries analysed, the companies located in Brazil sent a positive correlation with the quality of environmental reports had a sample weight of 63.39%, while those in Mexico had a weight issued by some company. In the same vein, Fuente et al. (2017) show- of almost 20%. Those in Chile on the other hand had a weight of case a relation with the compliance of the Global Reporting Initiative almost 15% and the weight of those in Argentina did reach the thresh- standards. Moreover, the presence of a CSR committee allows CSR old, representing only 2% of the observations. With respect to the programmes to be developed more efficiently, emphasizing a industry, the greatest weight in the sample analysed corresponded to business's commitment to its surrounding environment (Cucari utilities (18.95%], materials (15.95%%) and banks (11.6836). et al., 2017), and helping the set goals to be accomplished. There are several studies that have analysed the mediating role of a CSR committee and its effects on the independence of a board and on 3.2 | Variables the quality of environmental and social reports reported by the company (Garcia-Sanchez, Gomez-Miranda, David, & Rodriguez-Ariza, 2019). Nev- This research examines a firm's commitment to sustainability perfor- ertheless, there are no published reports on the previously mentioned mance in emerging countries. The objective was to examine the medi- effects of a cultural diverse board of directors. Moreover, research on ating effect of a CSR committee on the relationship between board emerging economies within this context also remains scarce. This ques- cultural diversity and sustainability performance tion acquires special relevance in emergent economies. First, because the As a dependent variable, in line with other studies like Sassen, existence of a CSR committee allows firms to adapt to the current social Hinze, and Hardeck (2016) and Garcia-Sanchez and Martinez-Fer- circumstances while gaining the trust of local stakeholders. Second, rero (2017), the sustainability performance, ESGScore, is measured because this committee also helps firms to overcome some institutional through the ESG score provided by Thomson Reuters Eikon. This voids often present in developing countries (Rotting, 2016). score is based on data reported in the public domain that considers Based on the above arguments, it is expected that the existence comparability, data availability and industry relevance. This score is of CSR committee can be used to mediate the relationship between grouped into 10 categories: resource use, emissions, innovation, man- board cultural diversity and CSR performance in emerging economies. agement, shareholders, CSR strategy, workforce, human rights, com- Thus, the following hypothesis is proposed: munity and product responsibility. These individual categories are proportionally weighted to obtain a final ESG score that is also broken H2 The existence of a CSR committee mediates the relationship down into three pillars (environmental, social and governance scores). between board cultural diversity and a firm's sustainability perfor- The score ranges from 0.1 to 100 and is based on the data points that mance in American emerging economies. the dataset assigns to the above categories.

MARTINEZ-FERRERO ET AL upon SUPPORT and 2 WILEYS TABLE 1 Sample composition by year, country and industry 3.3 | Research model and analysis technique Freq. % Panel A: Year This paper aims to examine the effect that board members with cul- 2012 80 11.4 tural backgrounds different from those of the country in which the 2013 83 11.82 firm is located has on sustainability performance and if this effect is 2014 85 12.11 dependent on the existence of a CSR committee. That is, the mediat- 2015 100 14.25 ing effect of the CSR com ittee on the relationship between board 2016 cultural diversity and sust ainability performance. 106 15.1 2017 To test these effects, we followed the Baron and 117 16.67 Kenny's (1986) process in three steps. First, the mediator (the exis- 2018 131 18.66 tence of a CSR committee) is regressed on an independent variable Panel B: Country (board cultural diversity). Second, the dependent variable (sustainabil Argentina 12 171 ity performance) is regressed on the in dependent variable. Third, the Brazil 445 63.39 depender ependent and media- Chile 105 14.96 tor variables. In t $5, Baron and Kenny (1986, p. 1177) have Mexico 140 19.94 established the criteria that "the effect of the independent variable on Panel C: Industry the dependent variable must be less in the third step than in the Automobiles and components 2 0.28 second step." Banks 82 11.68 Thus, the following three models were used for the mediating Capital goods 27 3.85 analysis Consumer durables and apparel 3.13 Consumer services 8 Prob (CSRCom)it = / CulturalDiversity;, + By Sizen + ByLeverage. 1.14 + BAROAt + As FreeFloata + BoardSize Diversified financials 16 2.28 ByBoardIndep + #qBoardMeetings; Energy 32 4.56 _& Year + > Industry: (1) Food and staples retailing 3.13 Food, Beverage and tobacco 74 10.54 Health care equipment and services 0.57 Country; + + Khe Household and personal products 11 157 Insuranc 13 1.85 ESGScore; = a, CulturalDiversity; + my Size, + ayLeverage, Materials 119 15.95 + zAROAn + asFreeFloata + a BoardSize: Media and entertainment 0.57 ay BoardIndep + agBoardMeetings, + _ Years Pharmaceuticals, biotechnology and 10 142 Life S m industry; + ) , Country; + 1, + Phi Real estate 13 1.85 Retailing 33 4.7 Software and services 9 1.28 ESGScore; = , CulturalDiversity; + 62CSRCom; + 6, Size; Telecommunication services 27 3.85 + 64 Leverage, + is ROA + 6: FreeFloate + 67 BoardSizex + 6: BoardIndep; + 69 BoardMeetings; Transportation 48 6 84 17 21 Utilities 133 &, Year, + > & Industry; (3) 18.95 702 K-18 Total 100 & Country; + 1 + pix As an explanatory variable, board cultural diversity is defined by Frijins et al. (2016) as the average of cultural tween board where ESGScore, CulturalDiversity and CSRCom are described in members. In this article, CulturalDiversity oard cultural Section 3.2; Size is the natural logarithm of the total assets; Leverage diversity as the percentage of a cultural is the ratio of total debt to total equity, ROA is the return on as background different from the location of the corporate headquarters. ratio; FreeFloat is the percentage of firm's equity that is available to As a mediator, CSRCom represents the existence of a CSR commit- capitalists in the stock exchange; BoardSize is the total number of tee on board. It is coded as one if a firm has a CSR committee and zero directors on ent direc- if it does not (Eberhardt-Toth, 2017; Godos-Diez, Cabeza-Garcia, tors over the total directors on th Meetings is the total Alonso-Martinez, & Fernandez-Gago, 2018). number of board meetings per year; Year, Country and Industry are

. WILEY-EN Carpostle Social Responsibility and MARTINEZ-FERRERO ET AL. Environmental Marogerent the dummy variables representing the 8 years, the 4 countries and the headquarters were located. As the moderating indicator, 496 had an 21 industries analysed; B,a and & represent the estimating parameters; operating CSR committee, of the 702 firm-year observations, rep- , represents the unobservable heterogeneity; and it represents the resenting 70.66% of the sample. These findings indicate that CSR is classical error term viewed as an important issue for companies operating in Latin Ameri- The above-mentioned regression models are examined for panel can countries (Lopez & Fornes, 2015). With regard to the control data, which are related to more informative and greater consistency, variables, the average board size comprised of approximately 12 direc- variability and explanatory power of the regression analysis. The tech- tors, while 30.74% of these boards had independent directors. nique of analysis depends on the nature of the dependent variable. Panel B reports the bivariate correlations among variables, with no Then, in Model 1, where the dependent variable is a dummy variable, high values being reported. Thus, multi-collinearity problems among the technique of analysis must be adequate for variables taking 0 and variables appear not to be a problem in our regression models. 1. Thus, we propose a logit regression. While, in Models 2 and 3, where the dependent variable is a censored variable (score from 0 to 100), we propose a Tobit regression that takes into account the 4.2 | Multivariate analysis: Exploring the mediating censored nature of the indicator from both the left (0) and the effect of the CSR committee right (100). Table 4 shows all three regression models defined using the Baron and Kenny's (1986) procedure. In Model 1, we regressed the mediator 4 | RESULTS variable on the independent one. In Model 2, we regressed the level of sustainability performance on the independent variable, while, in 4.1 | Descriptive statistics Model 3, we also include the mediating indicator as the explanatory variable. Table 2 summarizes the level of sustainability performance for each Model 1 provides results that support the positive and significant country (Argentina, Brazil, Chile and Mexico]. The mean value of sus- association between board cultural diversity and the existence of a tainability performance was around 60 within a possible range of CSR committee (01 = 0.2339 p < .10). The existence of a committee 0-100; in general, it was observed that the firms are committed to specialized in social and environmental issues is positively influenced social and environmental issues, but that more effort and commitment by culturally diverse boards. are still needed in this regard. Mexico had the highest rating out of Meanwhile, Model 2 provided results regarding the impact of the four countries analysed, with Brazil following closely behind, with board cultural diversity on sustainability performance on emerging mean ratings of 60.836 and 60.667, respectively. The firms from American countries. The results confirm the positive and significant Argentina showed an average rating of 57.427, while Chilean firms effect of cultural diversity on boards based on ESGScore (my=0.1151, had an average rating of 55.949. These data are, in part, contradictory p < .01]. The significant coefficient obtained supports hypothesis 1; to the statistical results presented by Amini and Dal Bianco (2017), thus, greater board cultural diversity leads to higher sustainability which show richer countries from Latin America, particularly Mexico, performance of firms located in American emerging countries. are less committed to CSR-related practices. Finally, the third regression model proposed aims to test the exis- Table 3 shows the descriptive statistics and bivariate correlations tence of a mediating effect on the above relationship. Does the effect in Panel A and B, respectively. Regarding the descriptive analysis, of board cultural diversity on sustainability performance depend on again we observed that the mean value obtained for sustainability the role played by a CSR committee? It should be noted that this performance was around 60 (note that the ESGScore value was in the model requires two supporting requisites: (a] the coefficient of the range of 0-100) As the main explanatory variable, board cultural mediator variable (i.e., CSR committee) must be significant; and (b) the diversity showed mean values around 32%, meaning that 32.03% of effect of the coefficient of the independent variable (i.e., board cul- the members on the boards analysed were from different cultural tural diversity) must be lower in this step than in Model 2. The results backgrounds than that of the area in which the corporate obtained clearly meet both stipulations. On the one hand, the results support the positive impact of a CSR committee on the social and TABLE 2 Sustainability performance by country environmental commitment of a firm (62-6.6714, p < _05). Thus, the greater the likelihood of the existence of a CSR committee leads to ESG score higher sustainability performance. On the other hand, the results Obs. Mean SD again indicate that board cultural diversity has a positive and signifi- Argentina 12 57.427 9.272 cant impact on sustainability performance ($1= 0.0907, p < .05). How- Brazi 445 60.667 13.279 over, the main finding of this model that supports the existence of a Chile 105 55.949 13.078 mediating effect is that this coefficient is lower than that determined Mexico 140 60.836 12.898 in the second step-Model 2-(6, = 0.0907 versus a, = 0.1151). Thus, Total 702 59.939 13.206 these findings support H2, where the existence of a CSR committee mediates the relationship between board cultural diversity and the

TABLE 3 Descriptive statistics Panel A: Mean and standard deviation Mean SD MARTINEZ-FERRERO ET AL. ESGScore 59.9399 13 20582 CulturalDiversity 32 03342 28 00461 Size 22.82518 1.729552 Leverage 1.413558 2 284399 ROA 0.0447554 0.0610875 FreeFloat 0.5940861 0.2778813 BoardSize 11.5355 4.346501 BoardIndep 30.74713 21 07363 BoardMeetings 14.70807 16.15652 Free CSRCom 496 73.37 Pand B: Bivariate correlations 1. ESGScore 2. Cultural Diversity -0.0454 3. CSRCom 0.3827" -0.1442" 4. 52 0.262" 0.0617 0.0443 5. Leverage 0.1144" -0.0236 0.0704 0.2075" 6. ROA -0.0249 0.1725- 0.0123 -0.2188-= -0.2078- 7. Free Float 0.1106" -0.1436" 0.0658 -00469 -0.0803* -0.0534 Environmental Management B. BoardS 2 0.0571 -0.3839" 0.1282" 0.1752- -0.0465 -0.1279* 9. BoardIndep Q. 127 -0.193* 0.1228* *= -00872" 00644' 0 2244" 0.0653* -0.2135"* Corporate Social Responsibility and 10. BoardMeetings 0.2348" 0.0262 0.1359 0.404 0.2358* -0.1448 0.0382 -0.079 p x.10 p < .05 p < .01 WILEY

MARTINEZ-FERRERO ET AL. Model 1 Model 2 Model 3 TABLE 4 The mediator effect of the CSR committee on the impact of board CSRCom ESGScore ESGScore cultural diversity on sustainability Dependent variable Coef Std. error Coef Std. error Coef Std. error performance CulturalDiversity 0.2339* 0.1209 0.1151** 0.0432 0.0907** 0.0427 CSRCom 6.6714** 2.7977 Size -1.3239 1.6628 1.5510 1.1665 1.5468 1.2061 Leverage 0.7733 2.5402 0.7724"* 0.2792 0.7176* 0.2749 ROA 21.5951 33.7862 -3.2688 12.9873 0.0566 12.9630 FreeFloat -3.8713 7.3829 10 8806* 6.4111 13.295** 6.6939 BoardSize 0.0775 0.4797 -0.3212 0.2648 -0.4535* 0.2674 BoardIndep -0.0036 0.0593 -0.1396** 0.0649 -0.1259* 0.0657 BoardMeetings 0.7098 0.3562 0.2275" 0.1055 0.1039 0.1129 Controlled by industry, country and year effects 0.9675 0.0285 0.8749 0.0403 0.8882 0.0382 P <.10. Abbreviation: CSR, corporate social responsibility. p x.05. "p x .01. sustainability performance of firms located in American emerging Lau et al. (2016) and Katmon et al. (2017) report, our results confirm countries. that board cultural diversity is associated with social and environment Overall, the previous results indicate that board cultural diversity tal strategies and ct owing to the culturally diverse encourages a firm's commitment to sustainability issues because backgrounds and values, as well as professional experience. higher social and environn hance in emerging American Lastly, the main finding of this paper is related to the existence of countries is ob ainability performance in the mediating impact of a CSR co mittee on the relationship between hains to be ison with other devel- board cultural diversity a nance. In emerging oped countries. results show the mediating effect of countries, the board cultural diversity on social and the existence of a CSR committee. That is, the positive impact of environmental commitment is justified, at least, in part, by the exis board cultural diversity on sustainability performance appears to be tence of a CSR committee. Thus, our results provide support for that justified by the existence of a CSR committee. reported by Peters and Romi (2014), Hussain et al. (2016) and Cucari Furthermo the average rating of sustainability performance in et al. (2017), among other ce of a CSR merging American countries is in accordance with the findings of committee ens ers' demands are met in terms of authors, such as Jamali (2008) and demudia (2011) among others. sustainable development ve a CSR committee promote These authors state that these countries still need to improve their and implement more social ental strategies. Because of attitudes toward social and environmental issues, as well as adapting the influence of the CSR com CSR policies to the local environment. ustainability performance, its presence mediates the relationship between board cultural diversity Moreover, our results confirm the assun ion that board cultural and the sustainability performance of firms in American emerging diversity exerts a positive impact on a firm's social and environmental countries. commitment. In these ersity acquires a relevant position in decision-maki nearby populations often descend from native ants and African 5 CONCLUSIONS slaves, among other races. As O'Neill et al. (1989) have proposed, we also believe that the board of direct in particular, its composition. The growing social aware plays a fundamer s of firms in developed countries, of the trategies of a firm. importance of their commitm Although the e current s ing economies, our results the motivating factors for this work. We have attempted to expand reported by internationally developed or cr -country (most of them upon what is already known about CSR issues by focusing on firms from the USA and the UK) studies. In this regard, our findings provide located in developing countries. additional evidence that board diversity favors satisfying the demands The objective of this work was to examine how board members, et al., 2014) by providing dif- with cultural backgrounds ferent points of view and expertise. Moreover, as Rao and Tilt (2015), a firm is located, behave toward sustainability performance and how

MARTINEZ-FERRERO ET AL. Environmental Management this effect may be dependent on the existence of a CSR committee. the creation of a CSR committee, the mechanisms that ensure greater That is to say, the mediating effect of the CSR committee on the rela- commitment to CSR and, therefore, greater company performance. In tionship between board cultural diversity and sustainability perfor- this sense, shareholders and managers find in the creation of a CSR mance. After analyzing a sample comprising 702 firm-year committee good corporate governance practice, which reinforces a observations from 2012 to 2018 from Argentina, Brazil, Chile and firm's commitment to CSR issues. Mexico, our results indicate that, in emerging countries, board cultural Regarding the usefulness of the results for regulatory bodies, the diversity significantly promotes sustainability performance and that results of this article also highlight the need for such bodies to pro- the presence of a CSR committee has a mediating effect. In other mote not only board independence or gender diversity among their words, the positive impact of board cultural diversity appears to be directors, but also cultural diversity. In addition, based on our results, justified by the existence of a CSR committee. it is recommended that these organizations establish some type of This article makes a number of contributions to the previous support or impulse measure for the creation of CSR committees. The literature about CSR determinants, board's composition and, especially, combination of board cultural diversity and the existence of a CSR about emerging countries. First, although previous studies on social and committee is essential for a firm's CSR performance. environmental issues have focused on the USA, the UK, and Asian and Nonetheless, the results of this study do suffer from some limita- European countries (Garcia-Sanchez & Martinez-Ferrero, 2017; tions. The first limitation mainly corresponds to the impossibility of Ferrero-Ferrero et al., 2015], this study focuses on emerging American obtaining a robust regression analysis by employing alternative countries as Visser (2008) requested. Thus, this paper contributes by methods to measure sustainability performance. Future research may solving the research gap regarding CSR studies on emerging countries. help to corroborate the findings reported here by using alternative The analysis of emerging American countries is of particular interest definitions or by exploring not only performance but also by reporting because: (a) there is more social awareness of the effect that CSR has on social and environmental issues. Future studies should examine on the sustainable development of an economy and the improvement additional sustainability strategies with respect to non-financial of poverty (Blowfield, 2005) and (b) there is greater pressure on com- reporting, like a firm's affiliation with the United Nations Global Com- panies in developing countries to increase their social activities pact, or should address sustainable developmental goals focused on (Visser, 2008]. In this regard, the evidence reported here helps to fill emerging countries. Second, this paper focuses on measuring sustain- the information gap on the emerging economies analysed by furthering ability issues, involving environmental, social and governance items. our understanding of the factors that promote emerging markets, Future studies should be performed with the objective of examining focusing on the cultural diversity of the board of directors, as well as not only the firm's global commitment to CSR issues, but also the the mediating role of the CSR committee. level of development of each individual score. Third, additional indica- Second, it is true that other authors have examined several corpo- tors must be explored like CEO duality, board member compensation rate governance mechanisms, such as the board of directors, where related to sustainability issues and so on. These characteristics could board independence, size, gender diversity among other factors favor or constrain the sustainability commitment, as well as the (Ferrero-Ferrero et al., 2015; Garcia-Sanchez & Martinez-Ferrero, reporting of non-financial information. Finally, the sample bias toward 2017; Michelon & Parbonetti, 2012) are considered. However, few Brazil should be emphasized as this country was over-represented in studies have assessed the role of cultural diversity (e.g., Carter the sample (almost 64% of firm-year observations]. The analysis could et al., 2010; Frijins et al., 2016) on a firm's performance, and research be performed in a more balanced sample, with a greater representa- on sustainability and board composition has mainly remained tion of the countries examined as well as with the rest of emerging unexplored. In this respect, this paper contributes to the prior litera- countries from America (Panama, Puerto Rico and Uruguay). There- ture by examining the implications of board composition (board cul- fore, future studies could also explore whether the results can be used tural diversity and the existence of a CSR committee) in firms located to generalize what may be happening in regions and industries with within emerging economies. Above all, this study has expanded on similar institutional factors (like GDP, culture, national responsibility previous research; in that, it focuses on emerging countries from to social and environmental issues), or whether these differences are America, as well as the mediating effect of the existence of a CSR specific to each sector (for instance, energy vs. retail). committee. However, the novel assumption here is that the impact of board cultural diversity on social and environmental performance ACKNOWLEDGEMENTS responds, at least, in part, to the existence of a CSR committee that The authors are thankful to the Multidisciplinary Institute of Enter- clearly determines the firm's sustainability strategy. prise (MIE); University of Salamanca and to the Regional Agency of The results of this research offer a set of implications to different the Spanish Government (JCYL-Grant/Award Number: SA069G18) agents, mainly those who participate on the board and within regula- for financial support. tory horlies The results reveal the positive effect of greater hoard cultural diversity on CSR performance and a mediated effect by the ORCID existence of a CSR committee. Given this evidence, shareholders, Jennifer Martinez-Ferrero (D https://orcid.org/0000-0001-8387-1466 investors and different stakeholders find in cultural diversity and in M. Belen Lozano @ https://orcid.org/0000-0001-8514-3737

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