Problems in corporate governance system take place where mechanisms of protection of certain shareholders in weakest. High ownership concentration in most European transition economies can prevent opportunistic managerial behavior in the sense of using corporate control for they own benefit. However, high ownership concentration has its price -blockholders are in position to follow their own interest on the cost of minority shareholders. In other words, from the position of control they have over corporation, blockholders in transition countries are in position to expropriate minority shareholders. This paper argues how agency problem of difference between cashflow control and property in the hands of one or several shareholders poses biggest threat on stability of corporate governance system in European transition economies.
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