Enriquez-Perales, SarelaGarcia-Gomez, Conrado DiegoDíez-Estaban, José MaríaLizarzaburu Bolaños, Edmundo R.2022-05-312022-05-312022-04-25Enriquez-Perales, S., García-Gómez, C.D., Díez-Esteban, J.M., & Lizarzaburu Bolaños, E. R. (2022). Formal institutions, ICSID arbitration and firm performance: evidence from Latin America. Eurasian Business Review, 12(2), 1-36. https://doi.org/10.1007/s40821-022-00213-4https://hdl.handle.net/20.500.12640/2975This paper analyzes how a country’s formal institutional quality impacts the performance of listed companies across different Latin American countries (namely, Argentina, Brazil, Colombia, Mexico, Peru, and Chile) and industries. Latin America provides a unique setting to address this question due to the region’s high institutional instability. The sample consists of 571 large listed companies, with a total of 8576 observations, for the period 2004–2019. Results show that the quality of a country’s formal institutions is positively related to firm performance, measured through two alternative variables (ROA and Tobin’s Q). Additionally, countries that are signatories of the ICSID agreement provide companies with a more stable environment in which to do business, which ultimately has a positive impact on their performance. However, as the number of cases recorded before the ICSID increases, the relationship turns negative. The paper provides a more comprehensive understanding of formal institutions by considering six alternative governance dimensions. Moreover, international arbitration is found to be a substitute for formal institutions in Latin American countries.application/pdfenginfo:eu-repo/semantics/openAccessFormal institutionsICSIDInstituciones formalesArbitrationCIADIFirm performanceArbitrajeDesempeño de la firmaLatin AmericaAmérica Latinainfo:eu-repo/semantics/articlehttps://doi.org/10.1007/s40821-022-00213-4https://purl.org/pe-repo/ocde/ford#5.02.04