The practices and corporate governance frameworks: comparative evidence from south-eastern European countries

Albulena Shala,Albana Berisha Qehaja

doi:10.47743/ejes-2021-0103

Abstract

Strong corporate governance requires legal, regulatory, and structural frameworks to be relevant and efficient. Poor corporate governance mechanisms, a lack of knowledge of the importance of good corporate governance and, often, a poor institutional structure were major impediments to the growth of effective financial markets and establishment of a stable investment environment in South-Eastern European Countries (SEE). In this paper, we comparatively analyse corporate governance practices and their legal frameworks in SEE countries. The study results show, on the one hand, that Albania has the lowest scores in corporate governance practices and, on the other hand, that Croatia and Slovenia have the highest scores in these practices. Overall, corporate governance is a significant subject for organizations of all sizes and has drawn interest from policy, corporate executives, stakeholders, and academic researchers.

Highlights

Financial intermediation by banks in South-Eastern Europe, in terms of both scope and structure, has rapidly and significantly evolved in recent years
Capital markets and corporate system management are less powerful tools for disciplining executives and they have more freedom to use their firm’s cash flows as they wish (Mueller and Peev, 2007). Normative entities such as the Basel Committee for Banking Supervision (BCBS), the Financial Stability Board (FSB) and the European Banking Authority (EBA) have made substantial progress in recent years to address the weak corporate governance standards of banks related to the financial crisis
To safeguard stakeholder rights and strengthen conformity with laws and regulations, as well as the codes of ethics that usually apply to the banking sector, banks are expected to execute their activities based on the standards of effective corporate governance

Summary

Introduction

Financial intermediation by banks in South-Eastern Europe (hereinafter referred to as SEE), in terms of both scope and structure, has rapidly and significantly evolved in recent years. SEE countries have not given attention to corporate governance concerns while the reform phase in the finance sector could have accelerated. The challenge of corporate governance development is undoubtedly more powerful in countries in which policy and institutional environments are less 54 | Albulena SHALA, Albana Berisha QEHAJA conducive to the implementation of corporate governance. Bad corporate governance can lead to bank defaults, which may result in real public losses and repercussions due to their possible effect on any existing deposit insurance policies and to the likelihood of wider macroeconomic effects, such as uncertainty danger and effect on payment structures (De Basilea, 2006). The governance of SEE banks is seen as a crucial feature of their effective integration into the European Union (Cigna and Guy, 2012)

Methods

Results

Conclusion