Cross-ownership, takeover threat and control benefit

摘要

This article critically examines two conventional ideas about cross-ownership: (1) it is almost impossible to takeover a cross-owned group of firms; (2) the controlling shareholder of a cross-owned group of firms extracts certain benefit from his/her control right. Through a simple analysis, we show that the amount of funds required to takeover a cross-owned group of firms is not necessarily bigger than the amount required to takeover a similar-sized stand-alone firm. Our analysis also indicates that the separation of control right and cash-flow right does not necessarily create extra benefit for the controller. Based on the analysis, we attempt to identify real barriers to the takeover of a cross-owned group of firms.