Crossownership

Crossownership is a corporate ownership arrangement in which two or more companies hold shares in each other, creating interlocking equity links that can be direct or routed through subsidiaries or holding companies. It often yields reciprocal voting rights and influence over governance, beyond any individual company’s standalone ownership.

Mechanisms of crossownership include direct reciprocal stakes, cross-holdings via intermediate entities, and networks where several firms hold shares in one another. Such structures can form long-term alliances, stabilize relationships, align strategic objectives, and facilitate capital sharing or risk pooling. They may also be used to deter hostile takeovers or to manage multi-faceted investment groups.

The motivations for crossownership vary. They include reinforcing business ties within a corporate group, coordinating industrial or technological standards, securing access to capital, and reducing the risk of opportunistic behavior by partners. However, crossownership can complicate corporate governance, blur lines of accountability, entrench management, and obscure true control in complex ownership blocs.

Regulatory and competitive implications are a key concern. Crossownership can raise antitrust worries when it reduces competition or creates signaling effects in markets. Disclosure requirements, limits on cross-holdings, and governance rules have been used in various jurisdictions to curb potential abuses. Historically, crossownership was prominent in Japan’s keiretsu-like groups and in some other regions with industrial alliances; in many markets it has declined as investor rights and competition policy have evolved.

See also: corporate governance, interlocking directorships, antitrust policy.