When companies sell goods/services, they may request cash prior to or at the delivery or they may offer deferred payment. The decision on credit policy is a trade-off between the benefits gained from increased sales and the costs of approving credit. Based on the appropriate analysis of reports, controlling should help the management to bring such business decisions aimed towards customers and to take all the necessary measures for obeying the appropriate legal regulations. This way, controlling may influence better liquidity of a company, which includes faster cash turnover, payment to its suppliers, lower outstanding accounts, and better profitability. Apart from the general importance of controlling credit sales and collection of receivables, the article examines the position and the role of controlling in the companies operating in wood processing as the fastest growing industry in Bosnia and Herzegovina.

Capital markets of the Western Balkan countries have been predominantly classified as frontier capital markets. Above all, these markets are characterized by a low level of liquidity, small trading volumes, and a low value of market capitalization. Also, there are high transaction costs involved, inefficiency in terms of the efficient market hypothesis, problem of determining the right market prices of securities, lost credibility of the stock market, and the marginalization of the influence of investment funds. Due to these features, frontier capital markets have a low level of their competitive ability. Competitive ability of the frontier capital markets has only recently become interesting to the academic community, which has seen the importance of strengthening competitiveness in less developed capital markets. The connection between the overall economic development and the level of development of the capital market points to the importance of strengthening the competitiveness of the frontier capital markets in order to empower the economy in general. Improving the competitiveness of frontier capital markets implies improvement of the key determinants of these markets, bearing in mind the complexity and two-dimensionality of the competitiveness of the capital market itself. The conducted empirical research focused on the frontier markets of the countries of the Western Balkans (Bosnia and Herzegovina, Serbia, Montenegro, and Macedonia). The research analyzed liquidity as the most important determinant of competitiveness of the selected frontier markets. Also, the research included potential investors as well as issuers on these markets. Based on the identification and analysis of the aspects critical to assessing the competitive ability of frontier capital markets, concrete strategies for improving the competitiveness of frontier capital markets have been created, which was the main goal of the research.

Financial Reynolds number works as a proxy for volatility in stock markets. This piece of work helps to identify the predictability and herd behavior embedded in the financial Reynolds number (time series) series for both CNX Nifty Regular and CNX Nifty High Frequency Trading domains. Hurst exponent and fractal dimension have been used to carry out this work. Results confirm conclusive evidence of predictability and herd behavior for both the indices. However, it has been observed that CNX Nifty High Frequency Trading domain (represented by its corresponding financial Reynolds number) is more predictable and has traces of significant herd behavior. The pattern of the predictability has been found to follow a quadratic equation.

The financial markets are found to be finite Hilbert space, inside which the stocks are displaying their wave-particle duality. The Reynolds number, an age old fluid mechanics theory, has been redefined in investment finance domain to identify possible explosive moments in the stock exchange. CNX Nifty Index, a known index on the National Stock Exchange of India Ltd., has been put to the test under this situation. The Reynolds number (its financial version) has been predicted, as well as connected with plausible behavioral rationale. While predicting, both econometric and machine-learning approaches have been put into use. The primary objective of this paper is to set up an efficient econophysics’ proxy for stock exchange explosion. The secondary objective of the paper is to predict the Reynolds number for the future. Last but not least, this paper aims to trace back the behavioral links as well.

This research analyzes interdependence and low efficiency of the selected capital markets in the period before and after the escalation of the global financial crisis. The aim is to show, based on the obtained results, the position that can be taken by potential investors in frontier capital markets of the Western Balkan countries. The sample included the daily values of the selected stock market indices for the period October 04, 2005 to October 25, 2012. The results showed that during the crisis potential benefits of international diversification based on investments in the observed frontier capital markets decrease as the correlations among capital markets during the crisis are higher than expected, which is marked as the “contagion effect”. In terms of low efficiency, it can be concluded that the results for the period before the crisis are expected, meaning that all the selected capital markets of the Western Balkans were inefficient. Efficiency tests for the period after the escalation of the crisis show somewhat contradictory results due to the characteristics of these markets and the effect of exogenous shock such as the financial crisis.

Since banks and insurance companies are financial institutions dealing with risks in vari - ous aspects of their business, it is important to make a general approach to the issue of risk and risk management from the perspective of these institutions. In that regard, we made a short overview of the risks these institutions are faced to as well as the methods they use for risk assessments. In order to limit our research to specific financial markets, we provided the basic characteristics of bank and insurance markets of Southeastern Europe (SEE), presenting the core indicators of development level of these markets and their legal and institutional environment related to new regulation proposed in Europe. We analyzed the level of implementation of Basel and Solvency risk assessment stan - dards in these countries and tried to anticipate direction(s) where these markets are going to move in the coming period.

*1 The authors wish to express their gratitude to one of the postgraduate students (an employee of the specific Bank) for her valuable help with the empirical research. **2 Adisa Delić, PhD, Faculty of Economics, University of Tuzla, Univerzitetska 8, 75000 Tuzla, Bosnia and Herzegovina, Phone: +387 61 331 830, E-mail: adisa.delic@untz.ba ***3 Emira Kozarević, PhD, Faculty of Economics, University of Tuzla, Univerzitetska 8, 75000 Tuzla, Bosnia and Herzegovina, Phone: +387 61 178 821, E-mail: emira.kozarevic@untz.ba ****4 Mersiha Alić, PhD student, Indiana Institute of Technology (Indiana Tech), 1600 E. Washington Blvd. Fort Wayne, IN 46803, USA, Phone: Tel: +1 260 804 0415, E-mail: malic01@indianatech.net Abstract

Small and medium sized enterprises (SMEs) take up over 98% of the structure of economies and are consequently the biggest creators of new jobs, innovations, economic activity, and greater social inclusion in the European Union. One of the biggest issues that SMEs face is collection of accounts receivable. Late payments in commercial transactions are made not only by private but also public sector, and that public sector entities, i.e. state institutions, are even larger generators of illiquidity compared to private companies. SMEs in BiH have certain, although insufficient, legal solutions available in combating late payment in commercial transactions. However, the fear of losing business partners overcomes their willingness to exercise their rights as creditors.

Financial system supports economic growth, while its regulatory framework provides stability for investors. Developing countries with bank-oriented financial systems are not attractive to investors, so prolonged status quo leads to economic deterioration. This is particularly the case with some of the most underdeveloped areas in Europe: Western Bal-kans. It is essential the developing countries in this region consider steps towards financial liberalization, which will help open the borders for capital flows and attract new investments. The main goal of this paper is to review and present the available information related to the banking system development in Western Balkans in terms of ownership structure, capital adequacy, loan and asset performance, return on investment and liquidity. These indicators should provide a clearer picture of the current financial systems in Western Balkans economies and their development progress – useful for comparison with other developing regions and financial transformation and liberalization efforts.

A stable, transparent financial system inspires confidence among investors and supports the overall economic growth. Inflexible regulation tends to slow down economic progress, making countries less attractive to investors. Economies with bank-oriented financial systems tend to be less attractive to investors, so their long-term goal is to demonstrate flexibility through liberalization, attracting new investors and ensuring survival in highly competitive and unforgiving global conditions. Liberalization success is even more essential for developing countries and their efforts to open the borders for capital flows and attract new investments. While financial liberalization affects all sectors of the economy and directly influences growth, it does not guaranty it. The removal of financial restrictions could affect capital distribution, increase volatility, create challenges for banks, etc. To support the liberalization efforts, it is very important to understand the nature of banking business, criticality of transparent and effective regulatory framework, as well as the expectations of potential investors. The main goal of this paper is to discuss the process of financial liberalization in developing countries and motivate the policy makers to consider available lessons when creating their balanced approach to financial (de)regulation processes towards financial development and integration in the global financial landscape.

healthcare system practice as its share in GDP has constantly increased during past decades, which is now above 10% of GDP in developed countries. However, very often it is more of an issue related to the current political and socio-economic situation in a country rather than the one managed by experts. Although one might expect that the increase in healthcare spending contributes to better health of the population, relevant indicators show that high healthcare spending in Bosnia and Herzegovina (BiH) does not result in better health of its population. Due to this reason, special attention needs to be paid to the economic analysis of healthcare spending. Irrational use of medications is just one of many problems associated with an inefficient health system, but one that heavily impacts on the health economics. In situations where it may not be easy to change the existing financing models, we should explore how to be more effective in spending within the existing structure. Better control of medication consumption could be one of the actions that helps improve the effectiveness of the available budget. Therefore, the general aim of the paper is to determine the effect that financial monitoring of medication consumption has on the control of increase in healthcare spending, which in turn might help establishing a financially sustainable healthcare system. Bearing in mind that irrational usage of medications influences the access to healthcare services, destabilizes country’s budget, and endangers the margin of social sustainability (endurance), the constant financial monitoring of medication consumption is important as it can help us recognize those segments where consumption deviates from standard and where prevention activities are needed. All this can result in the limitation of further increase in medication consumption.

Financial system supports economic growth, while its regulatory framework provides stability for investors. Developing countries with bank-oriented financial systems are not attractive to investors, so prolonged status quo leads to economic deterioration. This is particularly the case with some of the most underdeveloped areas in Europe: Western Balkans. It is essential the developing countries in this region consider steps towards financial liberalization, which will help open the borders for capital flows and attract new investments. The main goal of this paper is to review and present the available information related to the banking system development in Western Balkans in terms of ownership structure, capital adequacy, loan and asset performance, return on investment and liquidity. These indicators should provide a clearer picture of the current financial systems in Western Balkans economies and their development progress – useful for comparison with other developing regions and financial transformation and liberalization efforts.

The latest Basel Accord, which relies on the New Capital Accord (i.e. Basel II) and whose basic goals have been, from a normative standpoint, enhancing the banking sector’s ability to absorb the losses arising from economic distresses like the global financial crisis (2007-2009), improving risk management and governance, and strengthening the bank's transparency and disclosures, operationally emphasises the need to improve the quality and quantity of capital components, liquidity standards, and leverage ratio. The implementation of the Accord in developed economies started at the beginning of 2013 and the overall transition period from the Basel II framework should end by the year 2019. But as far as emerging economies are concerned, there are several issues on the road of implementation, such as necessary (technical) skills and expertise of bank staff as well as their supervisory institutions, sophisticated internal rating mechanisms and capacity, significant amount of new information and recordkeeping, etc. This paper discusses real and potential effects of Basel III in both developed and emerging economies. A special emphasis is given to the banking sector of Bosnia and Herzegovina. Keywords: International banking standards, Basel accords, Basel III, effects, developed economies, emerging economies, Bosnia and Herzegovina

Despite the fact that operational risks are as old as banks, operational risk management has become one of the new challenges for bank management since they face the new capital accord (i.e., Basel II). Basel II 'opened the door' to operational risks and proposed specific rules for operational risk management, including approaches for evaluation of these risks as well as calculation the level of the required capital. Hence, this can be viewed as an 'innovative' bank risk type and, in the paper, we discuss specificities of managing of operational risks with a focus on the banking sector of Bosnia and Herzegovina. Operational risks depend on the level of market development (emerging or developed). Since they are higher in emerging markets (such as Bosnia and Herzegovina), investment in decision support systems should aim to reduce operational risks exposure.