Cross-ownership, takeover threat and control benefit

This article critically examines two conventional ideas about cross-ownership: (1) it is almost impossible to takeover a cross-owned group of firms; (2) the controlling shareholder of a cross-owned group of firms extracts certain benefit from his/her control right. Through a simple analysis, we show...

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Bibliographic Details
Published in:Applied financial economics 2009-04, Vol.19 (8), p.659-667
Main Authors: Kim, Daehwan, Sung, Taeyoon
Format: Article
Language:English
Subjects:
Acquisitions & mergers
Business networks
Business ownership
Business studies
Control
Cooling
Economic concentration
Enterprises
Ownership and control
Shareholders rights
Studies
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Summary:This article critically examines two conventional ideas about cross-ownership: (1) it is almost impossible to takeover a cross-owned group of firms; (2) the controlling shareholder of a cross-owned group of firms extracts certain benefit from his/her control right. Through a simple analysis, we show that the amount of funds required to takeover a cross-owned group of firms is not necessarily bigger than the amount required to takeover a similar-sized stand-alone firm. Our analysis also indicates that the separation of control right and cash-flow right does not necessarily create extra benefit for the controller. Based on the analysis, we attempt to identify real barriers to the takeover of a cross-owned group of firms.
ISSN:0960-3107
1466-4305
DOI:10.1080/09603100801982638