Cross Holding

AAA

DEFINITION of 'Cross Holding'

A situation in which a publicly-traded corporation owns stock in another publicly-traded company. So, technically, listed corporations own securities issued by other listed corporations. Cross holding can lead to double counting, whereby the equity of each company is counted twice when determining value. When double counting occurs, the security's value is counted twice, which can result in estimating the wrong value of the two companies.

BREAKING DOWN 'Cross Holding'

Companies that have cross holdings are susceptible to confusion and management holdout in cases of company mergers and acquisitions, because one company might refuse consent to the other, and vice versa. Also, if Company A holds stocks or bonds in Company B, the value of this security might be counted twice, in error, because these securities would be counted when determining the value of the company issuing the security, and again when looking over the securities held by the other company.

RELATED TERMS
  1. Acquisition

    A corporate action in which a company buys most, if not all, ...
  2. Index

    A statistical measure of change in an economy or a securities ...
  3. Listed Security

    A financial instrument that is traded through an exchange, such ...
  4. Corporation

    A legal entity that is separate and distinct from its owners. ...
  5. Merger

    The combining of two or more companies, generally by offering ...
  6. Weighted Average Cost Of Capital ...

    A calculation of a firm's cost of capital in which each category ...
Related Articles
  1. Markets

    Material Adverse Effect A Warning Sign For Stocks

    Learn what this phrase means and how to spot it in a company's financial statements.
  2. Fundamental Analysis

    Mergers And Acquisitions: Understanding Takeovers

    In the dramatic world of M&As, battleground terms meld with bizarre metaphors to form the language of the game.
  3. Investing Basics

    The Importance Of Corporate Transparency

    Clear and honest financial statements not only reflect value, they also help ensure it.
  4. Fundamental Analysis

    Financial Footnotes: Start Reading The Fine Print

    Find out what could be hidden in this often-overlooked part of the financial statements.
  5. Investing Basics

    The Merger - What To Do When Companies Converge

    Learn how to invest in companies before, during and after they join together.
  6. Active Trading Fundamentals

    Evaluating A Company's Management

    Financial statements don't tell you everything about a company's health. Investigate the management behind the numbers!
  7. Bonds & Fixed Income

    What Are Corporate Actions?

    Be a savvy investor - learn how corporate actions affect you as a shareholder.
  8. Forex Education

    Mergers & Acquisitions: An Avenue For Profitable Trades

    When major corporate transactions have a big impact on the currency markets, you can benefit.
  9. Active Trading Fundamentals

    Trade Takeover Stocks With Merger Arbitrage

    This high-risk strategy attempts to profit from price discrepancies that arise during acquisitions.
  10. Stock Analysis

    5 Reasons Thoratec Corp. Keeps Impressing Investors

    Learn about Thoratec Corporation and its position in its industry. Understand five key factors why the company has impressed investors.
RELATED FAQS
  1. How long does it take to execute an M&A deal?

    Even the simplest merger and acquisition (M&A) deals are challenging. It takes a lot for two previously independent enterprises ... Read Full Answer >>
  2. What are some common accretive transactions?

    The term "accretive" is most often used in reference to mergers and acquisitions (M&A). It refers to a transaction that ... Read Full Answer >>
  3. What are some ways to make a distribution channel more efficient?

    While there are many ways to make a distribution channel more efficient, the three high-level ways to increase the efficiency ... Read Full Answer >>
  4. How is a tender offer used by an individual, group or company seeking to purchase ...

    A tender offer is made directly to shareholders in a publicly traded company to gain enough shares to force a sale of the ... Read Full Answer >>
  5. How does a company record profits using the equity method?

    A company that invests in another company and has majority control of it would record profits using the equity method. This ... Read Full Answer >>
  6. How does horizontal integration allow companies to share resources?

    In a horizontal integration, a company either acquires another company or merges with that company. This allows the resulting ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
  2. Alligator Spread

    An unprofitable spread that occurs as a result of large commissions charged on the transaction, regardless of favorable market ...
  3. Tiger Cub Economies

    The four Southeast Asian economies of Indonesia, Malaysia, the Philippines and Thailand. Tiger cub economy indicates that ...
  4. Gorilla

    A company that dominates an industry without having a complete monopoly. A gorilla firm has large control of the pricing ...
  5. Elephants

    Slang for large institutions that have the funds to make high volumes trades. Due to the large volumes of stock that elephants ...
  6. Widow's Exemption

    In general terms, a widow's exemption refers to the amount that can be deducted from taxable income by a widow, thereby reducing ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!