In this article, shadow economy and governance indices in Central and Eastern European countries are examined. For the year 2019, we looked at cross-sectional data for 17 countries and found that the most significant governance factors affecting economic activity that occurs outside of the official sector, such as the shadow or underground economy, were control of corruption, rule of law, political stability, voice accountability, government effectiveness, and regulatory quality. Ridge, Lasso, and Elastic Net Regression are all employed in this study. The findings are used to compare the strengths and weaknesses of the three chosen models and to determine the relative importance of each governance metric in the final model. The results suggested that all three methods have similar results. In terms of R-squared the method with highest value is Lasso, while in terms of the RMSE indicator elasticnet regression shows the lowest value.