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. 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 >>
  3. 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 >>
  4. 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 >>
  5. 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. Small Business

    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. Small Business

    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 ...
  3. 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.
  4. Investing

    Sneaky Subsidiary Tricks Can Cloud Financials

    Use consolidated financial statements to uncover a parent company's true performance.
  5. Small Business

    Understanding Consolidated Financial Statements

    Consolidated financial statements are the combined financial statements of a parent company and its subsidiaries.
  6. Investing

    Top 5 Companies Owned by Disney

    Look a little deeper into the Walt Disney Company's operations and learn more about how the global media conglomerate makes its money.
  7. Personal Finance

    What is Regulation W?

    Regulation W sets the terms for transactions between banks and their affiliates.
  8. Investing

    Disney Q1 Earnings Coming Up: What to Expect

    Wall Street expects the media conglomerate to deliver a slight decline in earnings per share, while revenue is expected to be flat.
  9. Financial Advisor

    Top Tips for Family Wealth Transfers

    Essential tips for tackling family wealth transfers.
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. Affiliate

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

    Companies that are less than 50% owned by a parent company; the ...
  5. Associate Company

    A corporation whose parent company possesses only a minority ...
  6. Subsidiary

    A company whose voting stock is more than 50% controlled by another ...
Hot Definitions
  1. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  2. Portfolio Investment

    A holding of an asset in a portfolio. A portfolio investment is made with the expectation of earning a return on it. This ...
  3. Treynor Ratio

    A ratio developed by Jack Treynor that measures returns earned in excess of that which could have been earned on a riskless ...
  4. Buyback

    The repurchase of outstanding shares (repurchase) by a company in order to reduce the number of shares on the market. Companies ...
  5. Tax Refund

    A tax refund is a refund on taxes paid to an individual or household when the actual tax liability is less than the amount ...
  6. Gross Domestic Product - GDP

    The monetary value of all the finished goods and services produced within a country's borders in a specific time period, ...
Trading Center