Loading the player...
A:

All three of these terms refer to the degree of ownership that a parent company holds in another company. In most cases, the terms affiliate and associate are used synonymously to describe a company whose parent only possesses a minority stake in the ownership of the company.

A subsidiary, on the other hand, is a company whose parent is a majority shareholder. Consequently, in a wholly owned subsidiary the parent company owns 100% of the subsidiary. For example, the Walt Disney Corporation owns about a 40% stake in the History Channel, an 80% stake in ESPN and a 100% interest in the Disney Channel. In this case, the History Channel is an affiliate company, ESPN is a subsidiary and the Disney Channel is a wholly owned subsidiary company.

In many cases of foreign direct investment, companies create subsidiaries and affiliates in host countries in order to prevent any negative stigma associated with foreign ownership or negative opinion associated with being owned by a controversial parent company.

In the banking industry, affiliate and subsidiary banks are the most popular setups for foreign market entry. Although affiliate and subsidiary banks must follow the host country's banking regulations, these styles of banking offices allow banks to underwrite securities.

To learn more, see Conglomerates: Cash Cows Or Corporate Chaos?

RELATED FAQS
  1. What is the difference between a subsidiary and a wholly owned subsidiary?

    Understand the primary differences between a subsidiary company and a wholly owned subsidiary, and their relationship to ... Read Answer >>
  2. Are domestic and foreign subsidiaries included on a company's financial statements?

    A subsidiary is a company that is controlled by another 'parent' company. The subsidiary acts and operates like its own entity ... Read Answer >>
  3. How do wholly owned subsidiaries operate in the European Union?

    Find out how wholly owned subsidiaries and their parent companies are treated in the European Union, specifically regarding ... Read Answer >>
  4. Are there any practical differences between a wholly owned subsidiary and a regular ...

    Explore the real, practical differences between a wholly owned subsidiary and a regular subsidiary. Local conditions determine ... Read Answer >>
  5. What is the difference between a subsidiary and a sister company?

    Discover the differences between subsidiary companies and sister companies, and understand how both are related to parent ... Read Answer >>
  6. How is taxation treated for both the parent and subsidiary company during a spinoff?

    Learn how the potential tax implications of a spinoff can affect both parent and subsidiary companies and how taxes may be ... Read Answer >>
Related Articles
  1. Investing

    Explaining Affiliate, Associate And Subsidiary

    Affiliate, associate and subsidiary are all terms referring to the degree of ownership a parent company holds in another company.
  2. Markets

    What is a Wholly Owned Subsidiary?

    A company whose common stock is 100% owned by another company, called the parent company.
  3. Investing

    What's a Subsidiary?

    A subsidiary is a corporation owned 50% or more by another corporation. The owning corporation is usually called the parent or holding company. A company that is 100% owned and controlled by ...
  4. Investing

    How To Calculate Minority Interest

    Minority interest calculations require the use of minority shareholders’ percentage ownership of a subsidiary, after controlling interest is acquired.
  5. Investing

    Sneaky Subsidiary Tricks Can Cloud Financials

    Use consolidated financial statements to uncover a parent company's true performance.
  6. Investing

    What's a Holding Company?

    A holding company is a corporation that owns enough voting stock in another company to control its management and policies.
  7. Investing

    What is a Spinoff?

    Businesses wishing to streamline their operations often sell less productive or unrelated subsidiary businesses as spinoffs.
  8. Entrepreneurship & Small Business

    Comparing Spin-offs, Split-Offs and Carve-Outs

    Spin-offs, split-offs and carve-outs are three methods a company can use to divest certain assets, a division or a subsidiary. Here's how they differ.
  9. Investing

    Understanding Consolidated Financial Statements

    Consolidated financial statements are the combined financial statements of a parent company and its subsidiaries.
  10. Retirement

    7 Essential Questions To Ask Aging Parents About Their Finances

    No one wants to think about the aging of his or her parents, let alone plan for their death. Unfortunately, aging is a part of life, and in order to truly support your parents, it's best to start ...
RELATED TERMS
  1. Wholly Owned Subsidiary

    A company whose common stock is 100% owned by another company, ...
  2. Affiliated Group

    Two or more corporations that are related through common ownership, ...
  3. Subsidiary

    A company whose voting stock is more than 50% controlled by another ...
  4. Associate Company

    A corporation whose parent company possesses only a minority ...
  5. Affiliate

    A type of inter-company relationship in which one of the companies ...
  6. Affiliated Companies

    Companies that are less than 50% owned by a parent company; the ...
Hot Definitions
  1. Duration

    A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. ...
  2. Dove

    An economic policy advisor who promotes monetary policies that involve the maintenance of low interest rates, believing that ...
  3. Cyclical Stock

    An equity security whose price is affected by ups and downs in the overall economy. Cyclical stocks typically relate to companies ...
  4. Front Running

    The unethical practice of a broker trading an equity based on information from the analyst department before his or her clients ...
  5. After-Hours Trading - AHT

    Trading after regular trading hours on the major exchanges. The increasing popularity of electronic communication networks ...
  6. Omnibus Account

    An account between two futures merchants (brokers). It involves the transaction of individual accounts which are combined ...
Trading Center