1. Describe the problems characterized in this case.2. What are the likely causes of these...

Question

1. Describe the problems characterized in this case.2. What are the likely causes of these problems?3. What are consequences of these problems for investors, Czech companies, and the Prague Stock Exchange?4. Outline a program of changes needed to correct the problems identified.
MINI CASE

The ethical climate in the Czech Republic has improved since the early days, but we still have a long way to go,?? said Josef Machinka, an economic adviser to the Ministry of Finance, while attending an investment seminar sponsored by the Prague Stock Exchange. ?oWe really lack an established ethical framework.?? Adds Charles University professor Jana Vychopen? , ?oEthical problems still exist, but they stem from 40 years under a system that promoted corruption. Under the communists it was all political influence. There wasn’t an economy—corruption sustained the system back then, but now chokes it. We were shocked into a market economy and our coupon privatization was racked with scandal. Even the word ?~tunneling,’ meaning asset stripping, was coined here.?? ?oEthics hangs over the market but so does a lack of transparency,?? states Pavel Kraus, analyst for Merta Investment Management. ?oMany of today’s managers forged their attitudes in the 70s and 80s. Under communism, secrecy—not transparency—was the watchword. They just don’t think it’s important to keep investors informed, so how do you know they’re not a bunch of shady managers trying to hide something???

David · Accepted Answer

1. Describe the problems characterized in this case 
Czech Republic is a European country with Prague being the capital and largest city. Prague 
Stock Exchange is the largest exchange in the country. County is facing tough economic and 
political challenges form quite a few years on account of corruption, lack of ethical framework 
and strong Corporate Governance& Regulatory body. Due to lack strong decision making 
authority the disciplined environment couldn’t have been established and as a result investment 
climate is weak. Its largest stock exchange, Prague Stock Exchange also couldn’t de developed 
as compliance and governance is weak. Therefore due to lack to transparency, fair investment 
climate a fair playground couldn’t be developed for investors and thus capital market activity 
remained subdued. Thus the case explains the political, economic and social issues in the country 
which it is facing at present. 
2. What are the likely causes of these problems?
The likely clauses are: 
Lack of political stability- This has resulted in weak governance and thus manipulation and 
corruption have taken place. Although post-communist regime, development activity spurt with 
privatization and economic growth but at the corruption got multifold and these ethical and 
corporate social responsibility issues grew hit the sentiment. Political clashes and differences in 
ideology between communist and other party affected the growth of the nation. Policies, law, 
rules and regulation have been tweaked and misused from time to time by people in power to 
take economic advantage for their personal benefit.

1. Describe the problems characterized in this case. 2. What are the likely causes of these problems? 3. What are consequences of these problems for investors, Czech companies, and the Prague Stock...

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