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This study aims to examine the association between the adoption of corporate governance practices and operational performance in companies listed on the Brazilian Stock Exchange.

The sample comprises the 80 largest companies in market value present in the Brazil Stocks Index in 2014. Principal component and cluster analyses techniques are used to evaluate performance and capital structure, and a regression model is applied to identify the relationship between key variables.

The findings show that the incidence of a high level of corporate governance in Brazil occurs among smaller companies with less desirable operational performance, rather than the biggest (blue chip) companies. Using a regression model with the return on assets as a dependent variable, a dummy variable for “governance”, and the size of the companies as a control variable, the authors find no association with good practices of corporate governance and operational performance for the companies in the sample.

Newer companies are more likely to exhibit a higher level of corporate governance because of the actions of foreign investors who demand the adoption of stronger corporate governance practices. Although there is demand from wealthy local institutional investors, many older traditional firms could still restructure to achieve higher levels of governance, especially in the case of emerging economies with less mature stock exchanges

This study contributes to the recent debates in the literature by identifying evidence for an association between operational performance and corporate governance rather than a causal relationship.