Parent Company

DEFINITION of 'Parent Company'

A company that controls other companies by owning an influential amount of voting stock or control. Parent companies will typically be larger firms that exhibit control over one or more small subsidiaries in either the same industry or other industries. Parent companies can be either hands-on or hands-off with subsidiaries, depending on the amount of managerial control given to subsidiary managers.

BREAKING DOWN 'Parent Company'

Companies can become parent companies by many different means. The two most common ways are through the acquisitions of smaller companies and the spinoff or creation of subsidiaries. For the purposes of accounting, parent companies report results of subsidiaries on audited statements when subsidiaries fall under the same corporate identity.

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RELATED FAQS
  1. What are some common cash-debt strategies that occur during a spinoff?

    Cash-debt strategies that are commonly used to in a spinoff to enable the parent company to monetize the spinoff are debt/equity ... Read Full Answer >>
  2. Are there any practical differences between a wholly owned subsidiary and a regular ...

    There are differences between a wholly owned subsidiary, or a company 100 percent owned by another company, and a regular ... Read Full Answer >>
  3. What is the difference between a subsidiary and a sister company?

    The difference between a subsidiary and a sister company lies in their relationship to the parent company and to each other. A ... Read Full Answer >>
  4. What are the differences between affiliate, associate and subsidiary companies?

    All three of these terms refer to the degree of ownership that a parent company holds in another company. In most cases, ... Read Full Answer >>
  5. How can a company execute a tax-free spin-off?

    The two commonly used methods for doing a tax-free spinoff are either to distribute shares of the spinoff company to existing ... Read Full Answer >>
  6. What happens to the company stock if a subsidiary gets spun off?

    When a subsidiary gets spun off, the company's stock tends to drop. However, the investor in the stock does not lose any ... Read Full Answer >>
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