The impact of corporate governance practices on financial performance in Western Balkan countries

Abstract

This study focuses on assessing the impact of the corporate governance practices of seven Western Balkan countries on their financial performance. Specifically, to investigate the specific relationship between them, we used measures of corporate governance such as the index of disclosure, liquidity and leverage, while to assess financial performance, we utilised return on assets and return on equity. We applied quantitative methods using secondary data. The data were extracted from the published reports of institutions such as the World Bank (WDI), the International Monetary Fund, and the central banks of the respective countries, as well as case studies and foreign literature in this field. Linear regression, fixed-effects, random effects and trend analysis were used to test the hypotheses, and this study will cover a period of five years. From the generated results of the models, we can conclude that the financial leverage and the index of financial disclosures positively influence the financial performance of the Western Balkan countries. We present real and consistent results regarding corporate governance practices' impact on Western Balkan countries' financial performance. Extracting data from the reports of WDI and CB and adhering to international literature allows us to draw competent conclusions and recommendations in this area.