_7_ firm, since that is not directly affected by the dilution of minority shareholders' rights through, for example, higher lending spreads.

The situation in the Czech Republic is similar to that in Germany where commercial banks, through proxy votes, effectively control large equity stakes in firms and in general have a large influence on firms. It has often been argued that German banks' interests may conflict with those of other equity holders, especially those whose shares are voted by the banks in proxy. This has been researched by several authors. Cable (1985) concludes that there is a positive impact of bank ownership and involvement on firms' performance in Germany. Edwards and Fisher (1994) discuss Cable's results and conclude that it is concentrated ownership, rather than any special relationships between banks and firms, which leads to improved performance. In their study of the performance of a sample of large German firms in 1975 and 1985, Gorton and Schmid (1996) reach a conclusion closer to that of Cable. They do not find evidence that there were conflicts of interest in either year. They find for 1975 that banks are special: they affect firm performance in a way which cannot be attributed to their role as blockholders. For 1985, they find no significant effects of banks on performance, but blockholders did affect performance significantly. To investigate the possibility of conflicts of interest in the Czech Republic, we separately analyze the effect of ownership by an investment fund sponsored by a firm's main bank, controlling for the relative size of the fund ownership.

# m. **Data: Resulting Ownership and Prices**

We have data on Czech firms compiled from the Aspekt Stock Market Database. The database contains financial and ownership information of 1191 firms listed on the Prague Stock Exchange (PSE). It is compiled on the basis of a questionnaire sent to firms by Aspekt a.s.. Starting from the first year of the survey (1992) the financial variables were defined using international accounting standards. Thus the switch to international accounting standards in only 1994 in the reporting of firms to the National Statistical Office does not affect our data-series. A number of firms do not report PSE-prices since their shares are not actively traded. The Aspekt database defines such firms as firms whose shares trade less than four times in any given year. We exclude such firms from our analysis. The 1992-95 data are complete for 371 firms which went through the first wave of voucher privatization. An additional set of 355 firms which went through the second wave report consistently after 1993, making altogether for 706 firms in the period 1993-1995.

Summary statistics on the ownership structure of the firms are presented in Table 1, Panel A. Six investor classes are distinguished: the state,' individuals, bank and non-bank sponsored IPFs, dlomestic direct and foreign direct investors. The ownership stakes of the major bank sponsored funds are listed separately in Table Al. Several banks have sponsored more than one 7. Shares held by the National Property Fund (through permanent, temporary and restitution shareholdings), shares to be sold through banks, and shares not sold.