Reforms of Corporate Governance and Takeover Regulation: Evidence from Serbia

Good corporate governance is considered one of the building platforms upon which economic success is based. The challenges of corporate governance in Serbia, which is moving toward EU membership, are particularly serious. Takeover regulation is an important corporate governance external mechanism, and the attempts to improve its provisions have a significant impact on the wider corporate governance system. Having reviewed recently released investigations on the legal extensiveness and effectiveness of corporate governance regulation in Serbia, we analyze significant interventions that were made in corporate and security legislation in Serbia last years. We indicate the privatization process as a primary, and concentration of ownership, low liquidity of the equity market, distortion of the key functions of the capital market and de-corporatisation as consequent key factors of corporate governance reform. We show that recent reforms include the reinforced role of the stock exchange and security commission in monitoring of companies' governance, as well as the improved regulatory framework, particularly in the field of takeover activity. The mandatory bid rule, principle of equal treatment of shareholders, squeeze-out and sell-out rules, are the regulatory devices created in the Serbian takeover regulation to achieve two main aims - a well-functioning market for corporate control and protection of the interests of minority shareholders. However, we indicate that the takeover regulation itself provides the possibility to evade the enforcement of the provisions regarding mandatory rules, both when parties to bid are obliged to activate the rule application and in the price determination process.