Corporate Governance Country Assessment : El Salvador

Abstract

This report assesses El Salvador s
 corporate governance policy framework. It highlights recent
 improvements in corporate governance regulation, makes
 policy recommendations, and provides investors with a
 benchmark against which to measure corporate governance in
 El Salvador. The OECD Principles focus on private-sector
 publicly traded companies, both financial and nonfinancial,
 but are also applicable to other public interest entities,
 including banks, insurance companies, and state-owned
 enterprises The equity market in El Salvador is small and
 has not showed much growth in the past five years. Most
 observers blame unwieldy approval processes for new share
 offerings, and the predominance in the economy of small- and
 medium-sized family-owned companies which do not have an
 interest in becoming public. Given the limited depth of the
 market, both regulator (SSF) and stock exchange (BVES) have
 taken measures towards regional integration. El Salvador
 today is participating in a regional initiative to develop
 an integrated Central American capital market with Panama
 and Costa Rica. Good corporate governance enhances investor
 trust, helps to protect minority shareholders, and can
 encourage better decision making and improved relations with
 employees, creditors, and other stakeholders. It is an
 important prerequisite for attracting the patient capital
 needed for sustained long-term economic growth.