Corporate Governance Practices in Bosnia and Herzegovina

The purpose of this paper is to present the state of corporate governance in Bosnia and Herzegovina, to determine the degree of its principle applications, and to emphasize the importance of good corporate governance practices for transition economies, such as Bosnia and Herzegovina. Corporate governance, by its simplest definition, presents a system of management and control over the company. Good corporate governance practice is important for the investment climate, because it provides greater security for investors and shareholders and leads to sustainable long-term economic development. Because of the reorganization of the still present economic system, developing countries are faced with many problems related to the implementation of corporate governance, such as insufficient use of existing legislation, underdeveloped capital markets and insufficient bussiness transparency of the company. Foreign investors do not wish to invest in companies that do not apply the principles of corporate governance and studies have shown that for making investment decisions, the application of good corporate governance practices plays an important role. The problems Bosnia and Herzegovina is facing are still a lack of business transparency of company operations, as well as the insufficient protection of minor shareholders. At the end of this paper certain guidelines are given in order to improve practices of corporate governance in Bosnia and Herzegovina, and also the importance of their application to the company and the country itself is highlighted. Keywords: corporate governance, transition economies, economic development, principles, business transparenc