Corporate Governance: a Systemic Approach with an Application to Eastern Europe

Abstract

There has been a long-standing debate on corporate governance in mature market economies.² Recently issues of corporate governance have also come to the fore in the transition economies of Eastern Europe and the former Soviet Union. Improving corporate governance has been singled out as one of two priorities in the recent memorandum of understanding between the International Monetary Fund (IMF) and the Russian government. Deficiencies of corporate governance have also been blamed for the recent balance-of-payments crisis in the Czech Republic, where disappointing growth in labour productivity despite relatively high investment rates, together with excessive wage increases and the lack of attractiveness of the Prague stock market for foreign investors, led to an overvaluation of the exchange rate and an unsustainable current account deficit.