What is cross-shareholding?

Cross-shareholding means that in an enterprise group composed of a parent company and a subsidiary company, the parent company holds a certain proportion of the shares of the subsidiary company and can control it. At the same time, subsidiaries also hold a certain proportion of the shares of the parent company, that is, they hold each other's shares and achieve a special purpose through mutual shareholding.

The positive role of cross-shareholding is to realize strategic cooperation between enterprises and prevent hostile takeover, but it also has adverse effects, including inflated capital, boosting the stock market, serious insider control and illegal interest transfer. If there is cross-shareholding between the parent company and the subsidiary company, the long-term equity investment of the parent company is usually treated equally with the owner's equity of the subsidiary company when preparing the consolidated financial statements; Long-term equity investments held by subsidiaries offset their share in owners' equity of corresponding subsidiaries.