crossshareholding

Cross-shareholding, also called reciprocal shareholding, is a situation in which two or more companies hold shares in each other, creating a mutual ownership link that goes beyond ordinary minority investments. It is used to secure strategic ties, align management incentives, and reduce exposure to hostile takeovers. Cross-shareholding can be direct, through mutual purchases of shares, or indirect, via cross-owned holding companies or equity-based alliances.

Forms include direct reciprocal stakes, through corporate groups, or via cross-holding structures that combine voting rights and protective provisions. In some industries, cross-shareholding coexists with long-term collaboration agreements, board representation, or interlocking directorates.

Benefits cited include enhanced coordination, stable capital relationships, and easier access to financing for long-term projects. Risks include reduced liquidity, entrenchment of management, conflicts of interest, obscured ownership, and potential harm to minority shareholders.

Regulation and trends vary by jurisdiction. Many markets have tightened governance and disclosure rules, and in several regions cross-shareholding has declined as markets favor dispersed ownership and independent oversight. Notable historical examples include Japan's keiretsu networks.