THE RELATIONSHIP BETWEEN THE QUALITY OF CORPORATE GOVERNANCE AND PROFITABILITY OF BUSINESS OPERATIONS

The quality level of corporate governance can be defined as the degree of compliance with set corporate governance standards defined at the international and national institutional levels. Guided by previous theoretical and empirical findings, Bosnia and Herzegovina has characteristics of a closed corporate governance system in both entities and, for this reason, the models that measure corporate governance in countries with typical closed corporate governance systems are selected as the basis for developing a model for measuring the level of corporate governance. Measuring the quality of corporate governance provides a clear picture of the internal strengths and weaknesses of the corporate governance system in corporations in Bosnia and Herzegovina. The quality of corporate governance is one of the non-financial indicators of business operations and shows the degree of compliance with international standards of corporate governance. A significant number of studies show that corporations that achieve higher standards and better practices of corporate governance also have better financial results and thereby higher value in the capital market. This means that corporations with a higher level of corporate governance also have a better financial result of business operations, easier access to financial capital and higher value in the capital market. The subject of the study is to determine the relationship between the quality of corporate governance and profitability of business operations of corporations, and considering that this is historical data, the study will determine whether corporations that had good corporate governance also had greater business profitability and vice versa. The mean objective of the study is to determine the relationship between the quality of corporate governance and business profitability indicators and the direction of this relationship.