The expansion of the MENA region's equity and debt capital markets must go hand in hand with stronger corporate governance and financial regulation. Financial market reform requires better governance structures, necessitating legal reforms as well as improvements in policies and procedures required to foster private sector development and tackle inefficient, ineffective and discriminatory government practices.
Better public governance – the rule of law, protection of property rights, efficient bureaucracy, anti-corruption measures, effective and transparent regulations, and quicker licensing procedures – are intrinsically linked to corporate governance. The latter tends to get defined in terms of accountability, transparency, openness and integrity. It also concerns defining shareholder rights and managing the mechanisms through which these rights are exercised; protecting the rights of external suppliers of equity finance; and ensuring checks and balances to manage issues of independence and interference that stem from separating management and ownership in firms.
Issues of corporate governance have come to the fore in the west in the wake of the Asian financial crisis and the later Enron and WorldCom reporting scandals. Governance of the banking sector in particular has become a topic of greater interest, given the sector's management of large amounts of financing, especially in countries where stock markets are immature.