Emerging markets are becoming importantengines of global growth. These markets, such as thetransition economies in Europe and Central Asia, are viewedwith increasing interest by foreign investors as privatesector participation grows, as regulatory reforms takeeffect, and as individual firms focus on elevating theirbusiness practices to align with international standards. Infact, foreign direct investment inflows to transitioneconomies increased by 28 percent to reach $108 billion in2013, according to the United Nations Conference on Tradeand Development. Sound corporate governance is a criticalelement in helping these emerging markets meets their fulleconomic potential. Good corporate governance, defined asthe structures and processes by which companies and banksare directed and controlled, helps firms operate moreefficiently, improves access to capital, mitigates risk, andsafeguards against mismanagement. Good governance alsofacilitates appropriate consideration of other criticalissues for enterprises, including environmental and socialresponsibility. It is the foundation for long-term businessgrowth and sustainability, adding value for investors andcontributing lasting dividends for economies. Companies andbanks, particularly those in emerging markets that arefocused on improving their corporate governance can look toa growing body of evidence that such efforts matter,yielding bottom line benefits, reputational enhancements,and competitive differentiation. In one study of note, theEmerging Market Investor Survey, 100 percent of theinvestors interviewed said they will pay a higher premiumfor good governance in an emerging market firm than whatthey would pay for a similar firm in a developed market. Ascompanies and banks in Europe and Central Asia find theirplace on the world’s economic stage, efforts to enhancegovernance practices are helping them reduce their businessrisks, improve performance, and set the course for long-termsuccess and profitability.
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