The role of corporate governance in transition economies: contribution and development

With more evident process of globalization of the world market, the concept of corporate governance gains importance. The global economic crisis highlighted the problems of corporate governance both in developed countries and developing economies. Analyzing the effects of the global economic crisis, including striking collapse of many companies, the huge increase in unemployment and the increased number of people living on the poverty line and below, it can be concluded that some of these problems are result of various weaknesses and failures of corporate governance. Even though the introduction of a number of rules, codes and practices of corporate governance have been made, the global economic crisis has shown that more effective application of the standards of corporate governance is necessary. Corporate governance issues are especially important in transition economies, since these countries do not have the long-established financial institution infrastructure to deal with corporate governance issues. Before 1989 there was no need to discuss corporate governance issues, because all enterprises were owned by the state and there were no shareholders. All that has changed. This paper discusses the importance of corporate governance, with special reference to transition economies. Directors, owners and corporate managers have started to realize that there are benefits that can accrue from having a good corporate governance structure. Good corporate governance helps to increase share price and makes it easier to obtain capital. International investors are hesitant to lend money or buy shares in a corporation that does not subscribe to good corporate governance principles. Transparency, independent directors and a separate audit committee are especially important. Key words: corporate, governance, transition, principles; Clasification JEL: D23, G32, G38, K1, N0.