The web of cross-ownership among Czech financial intermediaries: An assessment

Europe - Asia Studies

Volumn 48, Issue 5, 1996, Pages 797-809

  Kenway, Peter ^a   Klvačová, Eva ^a  

^a UNIVERSITY OF READING   (United Kingdom)

Author keywords

[No Author keywords available]

Indexed keywords

CROSS-OWNERSHIP; FINANCIAL INTERMEDIARY; INDUSTRIAL OWNERSHIP; PRIVATISATION;

CZECH REPUBLIC;

EID: 0030456127     PISSN: 09668136     EISSN: None     Source Type: Journal    
DOI: 10.1080/09668139608412382     Document Type: Article

References (18)

1. Alice Teichova, An Economic Background to Munich: International Business and Czechoslovakia 1918-1938 Cambridge, Cambridge University Press, 1974), p. 337.
2. The notion of a 'web' of cross-ownership is strongly apparent in a diagram reproduced by Pavel Mertlík, 'Czech Privatization: from Public Ownership to Public Ownership in Five Years?', Prague Economic Papers, 1995, pp, 321-336.
3. Karla Brom & Mitchell Orenstein, 'The Privatised Sector in the Czech Republic: Government and Bank Control in a Transitional Economy', Europe-Asia Studies, 46, 6, 1994. pp. 893-928.
4. Research for this article was funded under a Nuffield Foundation project on 'The evolving pattern of investment privatisation fund ownership in the Czech Republic'. Support from the Foundation is gratefully acknowledged. We would also like to thank Mark Casson, Jeremy Edwards and Geoff Jones for comments on an earlier version and for help and information with German data. All opinions and errors are the sole responsibility of the authors.
5. At the end of 1995 exchange rate this is equivalent to approximately US$0.25bn.
6. The data, pertaining to the end of February 1995, were supplied by the Fund of National Property for the purposes of this research.
7. It should perhaps be mentioned that in the Czech Republic shares held by the Fund of National Property are deemed to be private shares; that is, according to the law on large-scale privatiaation one of the privatisation methods was the transfer of the shares of a privatised company from the state to the Fund of National Property (!).
8. A. Gottschalk, 'Der Stimmrechtseinfluß der Banken in den Aktionärsversammlungen von Großunternehmen', WSI Mitteilungen, 1988, pp. 294-304.
9. Information reported by Commerzbank, Wer Gehört zu Wem (Frankfurt-am-Main, 1994). A discussion with the chairman of Deutsche Bank confirms that no shareholder has a stake larger than 5%.
10. The results of these interviews were earlier reported in Eva Klvačová and Peter Kenway, 'Rozzlobene fondy' ('Investment Funds are Angry'), Ekonom, 1995, 17.
11. The two questions asked here were: 'What are your intentions in the short term, the medium term and the long term?' and 'What is the orientation of your fund - to administer your portfolio or make active interventions in "your" companies?'.
12. The three questions asked here were: 'Do you prefer to be involved in the board of directors, or the supervisory board?'; 'Have you changed top management? Do you think that the management's goal function is compatible with the goal function of today's owners?'; and 'What kind of changes have you made in "your" companies?'.
13. The two questions asked here were: 'Do you feel yourself limited by the 10 and 20% limits' and 'What problems should be solved by the new law on collective investment?'
14. See, for example, Olivier Blanchard, Rudiger Dornbusch, Paul Krugman, Richard Layard & Lawrence Summers, Reform in Eastern Europe (Cambridge, MA, MIT Press, 1991).
15. Jeremy Edwards, 'Bank-based Systems of Investment Finance: the lessons of post-1945 German Experience', Prague Economic Papers, 1995, pp. 235-248.
16. In particular instances a bank may decide to extend credit to a firm suffering liquidity problems if it judges that the firm's problem is only temporary. The most likely reason for a firm to be in this position is that it is currently in the throes of a large investment programme. A bank that decides against declaring this firm bankrupt can still be acting to maximise its profits. But to the extent that the Czech privatised sector has not to date been marked by a high level of investment activity, this cannot be the explanation for the low incidence of bankruptcy in the Republic. It has been suggested that Czech banks are reluctant to declare bankrupt those firms to which they have lent money 'for fear of losing everything'. While again this may be entirely reasonable in any individual case it cannot be consistent with profit maximisation if it is elevated to the status of a general rule since it would mean that the most creditworthy firms were those which were already most heavily borrowed.
17. Jeremy Edwards & Klaus Fischer, Banks, Finance and Investment in Germany (Cambridge, Cambridge University Press, 1994).
18. Peter Kenway & Jiří Chlumský, "Privatization and the behaviour of firms: what difference have Investment Privatization Funds made in the Czech Republic?', University of Reading Discussion Paper in Economics, 316, 1995.