Parent Company

What is a 'Parent Company'

A parent company is 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.

RELATED TERMS
  1. Subsidiary

    A company whose voting stock is more than 50% controlled by another ...
  2. Wholly Owned Subsidiary

    A company whose common stock is 100% owned by another company, ...
  3. Unconsolidated Subsidiary

    A company that is owned by a parent company, but whose individual ...
  4. Downstream Guarantee

    A guarantee placed on a loan on behalf of the borrowing party ...
  5. Consolidated Financial Statements

    The combined financial statements of a parent company and its ...
  6. Associate Company

    A corporation whose parent company possesses only a minority ...
Related Articles
  1. 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 ...
  2. Economics

    What is a Wholly Owned Subsidiary?

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

    Mergers and Acquisitions: Break Ups

    As mergers capture the imagination of many investors and companies, the idea of getting smaller might seem counterintuitive. But corporate break-ups, or de-mergers, can be very attractive options ...
  4. Investing Basics

    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.
  5. Economics

    What is a Spinoff?

    Businesses wishing to streamline their operations often sell less productive or unrelated subsidiary businesses as spinoffs.
  6. Investing Basics

    Sneaky Subsidiary Tricks Can Cloud Financials

    Use consolidated financial statements to uncover a parent company's true performance.
  7. 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.
  8. Investing

    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. Professionals

    Controller: Job Description & Average Salary

    Learn about becoming a controller and what the job entails. Understand the education and skills required, and how much money you can expect to make.
  10. Financial Advisors

    Top Financial Planning Issues for Older Parents

    Clients who have children later in life present an opportunity for advisors. Here are the key the financial planning issues that need to be addressed.
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. 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 >>
  4. 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 >>
  5. How do spinoffs impact investors in the both the parent and subsidiary companies?

    Learn about how spinoffs affect investors in both the parent company and the subsidiary and what strategies investors use ... Read Answer >>
  6. What are the tax implications for both the company and investors in a divestiture ...

    Learn the tax implications for a company and its investors in divestiture events, such as spinoffs, equity carve-outs, and ... Read Answer >>
Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  4. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  5. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  6. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
Trading Center