Characteristics of the Corporate Bank Governance System in Bosnia and Herzegovina

• Published in: Ekonomski vjesnik Vol. XXIII; no. 1
• Main Authors: Branko Matić, Nikola Papac
• Format: Journal Article
• Language: English
• Published: Faculty of Economics and Business in Osijek 01.07.2010
• Subjects: corporate governance; corporate governance system; stakeholders; the banking sector of Bosnia and Herzegovina
• ISSN: 0353-359X; 1847-2206

The term ‘corporate governance’ stands for a set of relations between management, large and small shareholders and other interest groups. A good corporate governance system is the basic postulate of sustainable economic growth, increase in economic system efficiency and a guarantee for easier access to sources of foreign capital. Ownership concentration is a significant internal mechanism of corporate governance because it greatly defines the relationship between owner and manager. There are two types of ownership concentration: highly dispersed ownership, that is, low ownership concentration, and very high ownership concentration. These concentration differences affect the corporate governance system itself, so there is a difference between a closed corporate governance system in the situation of high ownership concentration and an open corporate governance system where the situation is the reverse. The form of the system affects how the governing body is formed and structured, as well as how it operates and conducts its business policies. Within the financial system of Bosnia and Herzegovina, the banking system is dominant. An analysis of the corporate governance system has shown a relationship between ownership concentration and the form of the corporate governance system itself. The banking sector is predominantly owned by foreign companies and is characterized by a high ownership concentration. The fact that the corporate governance system is closed affects the election of members to the governing body and their work in enforcing business policies.