(C) Corporate governance in Bulgaria

The rational investors include the adequate corporate governance in their pricing models through either reduction in the required rate of return or direct premium on the intrinsic value of the company. The first approach has pretty much limited use in the developing markets due to its complexity. The second approach seems more feasible in developing markets such as the Bulgarian one.

Having in mind the predominant trading moods on the Bulgarian Stock Exchange (BSE), any purchases based on fundamental analysis would be rarity. Hence the valuation formula of most of the participants stands to exclude the good corporate governance.

The role of the National Code for Corporate Governance is to focus the investors’ attention to public companies, that have established mechanisms for protection of the minority stakeholders; have guaranteed the independence of supervisory body from the management; have minimized the conflicts of interest; have developed a transparent company and have eliminated the insider trading.

I personally expect that the investors on the Bulgarian market will gradually become aware of the difference between the corporate PR and the above mentioned principles of good corporate governance, which will be reflected in the price bulletins, thence in the public companies corporate performance.