Corporate governance in transitio n economies

Abstract

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 the fall of the Berlin Wall and the collapse of the Soviet Union, 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 since 1989. This chapter discusses how transition economies are dealing with corporate governance issues and the extra obstacles they have to overcome due to a lack of established financial institution infrastructure. Corporate governance has become an important topic in transition economies in recent years. Directors, owners and corporate managers have started to realize that there are benefits tha 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. Some international investors will not seriously consider investing in a company that does not have these things. © 2009 Springer US.