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Does better corporate governance increase operational performance?

Does better corporate governance increase operational performance? PurposeThis study aims to examine the association between the adoption of corporate governance practices and operational performance in companies listed on the Brazilian Stock Exchange.Design/methodology/approachThe 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.FindingsThe 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.Practical implicationsNewer 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 exchangesOriginality/valueThis 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Corporate Governance Emerald Publishing

Does better corporate governance increase operational performance?

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1472-0701
DOI
10.1108/CG-03-2016-0063
Publisher site
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Abstract

PurposeThis study aims to examine the association between the adoption of corporate governance practices and operational performance in companies listed on the Brazilian Stock Exchange.Design/methodology/approachThe 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.FindingsThe 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.Practical implicationsNewer 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 exchangesOriginality/valueThis 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.

Journal

Corporate Governance – Emerald Publishing

Published: Jun 5, 2017

References

  • Corporate governance in emerging markets
  • Corporate governance in emerging economies
  • Governança corporativa e desempenho: um estudo das empresas brasileiras não listadas na Bovespa
  • What matters and for which firms for corporate governance in emerging markets? Evidence from Brazil (and other BRIK countries)
  • Board structure and firm technical efficiency: evidence from Canadian state-owned enterprises