Director attributes and institutional investor choices : evidence in Latin America

Purpose: This paper examines how the board of directors' attributes in terms of educational and professional backgrounds –that is board capital-, and demographics influence institutional ownership across listed companies in Latin America. Design/methodology/approach: Based on unique hand-collected information of directors' educational and professional attributes across 427 firms in Latin America, the authors analyze the effects of directors' educational attainment, professional experience and demographic diversification on institutional investors' holdings. Findings: Results show that grey investor ownership favors directors with graduate studies and diverse boards regarding gender and nationality. Independent investors value the directors' professional experience like former founders of a firm. Grey investors are more concerned with firm corporate governance mechanisms, consistent with the agency view. In contrast, independent institutional investors focus on business opportunities following the board of directors' resource-based view. Research limitations/implications: This study shows that board capital becomes a key determinant for institutional ownership in emerging markets. Originality/value: This study extends previous literature on institutional investor preferences by providing empirical evidence that firm board capital becomes a collective asset that is central for institutional investors' investment choices for an emerging market case.