Cross ownership is a method of reinforcing business relationships by owning stock in the companies with which a given company does business. Heavy cross ownership is referred to as circular ownership. The Japanese economy is alleged to be heavily characterized by cross ownership. In the US, "cross ownership" also refers to a type of investment in different mass-media properties in one market.

Cross ownership of stock

Countries noted to have high levels of cross ownership include: *

Japan Japan ( ja, 日本, or , and formally , ''Nihonkoku'') is an island country in East Asia. It is situated in the northwest Pacific Ocean, and is bordered on the west by the Sea of Japan, while extending from the Sea of Okhotsk in the north ...

Germany Germany,, officially the Federal Republic of Germany, is a country in Central Europe. It is the second most populous country in Europe after Russia, and the most populous member state of the European Union. Germany is situated betwe ...

Positives of cross ownership: * Closely ties each business to the economic destiny of its business partners * Promotes a slow rate of economic change Cross ownership of shares is criticized for: * Stagnating the economy * Wasting capital that could be used to improve productivity * Expanding economic downturns by preventing reallocation of capital * Lessening control of shareholders over corporate leadership. A major factor in perpetuating cross ownership of shares is a high

capital gains tax A capital gains tax (CGT) is the tax on profits realized on the sale of a non-inventory asset. The most common capital gains are realized from the sale of stocks, Bond (finance), bonds, precious metals, real estate, and property. Not all count ...

rate. A company has less incentive to sell cross owned shares if taxes are high because of the immediate reduction in the value of the assets. For example, a company owns $1000 of stock in another company that was originally purchased for $200. If the capital gains tax rate is 25% (like in Germany), the profit of $800 would be taxed for $200, causing the company to take a $200 loss on the sale. Long term cross ownership of shares combined with a high capital tax rate greatly increases periods of asset deflation both in time and in severity.

Media cross ownership

Cross ownership also refers to a type of media ownership in which one type of communications (say a newspaper) owns or is the sister company of another type of medium (such as a radio or TV station). One example is ''

The New York Times ''The New York Times'' (''the Times'', ''NYT'', or the Gray Lady) is a daily newspaper based in New York City with a worldwide readership reported in 2020 to comprise a declining 840,000 paid print subscribers, and a growing 6 million paid ...

''s former ownership of WQXR Radio and the ''

Chicago Tribune The ''Chicago Tribune'' is a daily newspaper based in Chicago, Illinois, United States, owned by Tribune Publishing. Founded in 1847, and formerly self-styled as the "World's Greatest Newspaper" (a slogan for which WGN radio and television ar ...

s similar relationship with WGN Radio (

WGN-AM WGN (720 kHz) is a commercial AM radio station in Chicago, Illinois, with studios on the 18th floor of 303 East Wacker Drive in the Chicago Loop. WGN has a news/talk format, along with broadcasts of Chicago Blackhawks hockey and Northwestern ...

) and Television (

WGN-TV WGN-TV (channel 9) is an Independent station (North America), independent television station in Chicago, Chicago, Illinois, United States. Owned by Nexstar Media Group, it is sister station, sister to the company's sole radio property, talk ra ...

). The

Federal Communications Commission The Federal Communications Commission (FCC) is an independent agency of the United States federal government that regulates communications by radio, television, wire, satellite, and cable across the United States. The FCC maintains jurisdiction ...

generally does not allow cross ownership, to keep from one license holder having too much local media ownership, unless the license holder obtains a waiver, such as

News Corporation News Corporation (abbreviated News Corp.), also variously known as News Corporation Limited, was an American multinational mass media corporation controlled by media mogul Rupert Murdoch and headquartered at 1211 Avenue of the Americas in Ne ...

and the

Tribune Company Tribune Media Company, also known as Tribune Company, was an American multimedia conglomerate headquartered in Chicago, Illinois. Through Tribune Broadcasting, Tribune Media was one of the largest television broadcasting companies, owning 39 ...

have in New York. The mid-1970s cross-ownership guidelines grandfathered already-existing cross ownerships, such as ''Tribune''-WGN, ''New York Times''-WQXR and the ''

New York Daily News The New York ''Daily News'', officially titled the ''Daily News'', is an American newspaper based in Jersey City, NJ. It was founded in 1919 by Joseph Medill Patterson as the ''Illustrated Daily News''. It was the first U.S. daily printed in ta ...

'' ownership of

WPIX WPIX (channel 11) is a television station in New York City. Owned by Mission Broadcasting, it is operated under a local marketing agreement (LMA) by Nexstar Media Group, making it a ''de facto'' owned-and-operated station and flagship (broadcas ...

Television and Radio.

References

{{DEFAULTSORT:Cross Ownership Business ownership Strategic management