This paper offers a comparative analysis of key contemporary issues of corporate governance in Croatia and Bosnia and Herzegovina -efficiency of corporate boards and efficiency of minority shareholders' protection. Also the paper argues how nature of corporate governance in transition countries is not solely a determinant of legislative effects as most literature suggests but is also determined by the implementation of legal instruments.
Problems in corporate governance systems arise where mechanisms of protection of certain shareholders are the weakest. High ownership concentration in most European transition economies can help prevent the opportunistic managerial behaviour. However, high ownership concentration has its price - block-holders are in the position to pursue their own interests at the cost of minority shareholders. In other words, from the position of control they have over the corporation, block-holders in transition countries are in able to expropriate minority shareholders.
This paper argues how agency problem of difference between cash flow control and ownership in the hands of one or several shareholders poses the biggest threat on stability of corporate governance system in European transition economies.