Cross ownership
Encyclopedia
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.
In the US, "cross ownership" also refers to a type of investment in different mass-media properties in one market.
Positives of cross ownership:
Cross ownership of shares is criticized for:
A major factor in perpetuating cross ownership of shares is a high capital gains tax 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 50% (like Germany) and the company sells the stock,
the company has $600 which is 40 percent less than before it sold the stock.
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.
's former ownership of WQXR
Radio and the Chicago Tribune
s similar relationship with WGN Radio (WGN-AM) and Television (WGN-TV
).
The Federal Communications Commission
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
and the Tribune Company
have in New York.
The mid-1970s cross-ownership guidelines grandfathered already-existing crossownerships, such as Tribune-WGN, New York Times-WQXR and the New York Daily News
ownership of WPIX
Television and Radio.
In the US, "cross ownership" also refers to a type of investment in different mass-media properties in one market.
Cross ownership of stock
Some countries where cross ownership of shares is a major part of the business culture are:- JapanJapanJapan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
- GermanyGermanyGermany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
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
A major factor in perpetuating cross ownership of shares is a high capital gains tax 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 50% (like Germany) and the company sells the stock,
the company has $600 which is 40 percent less than before it sold the stock.
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 TimesThe New York Times
The New York Times is an American daily newspaper founded and continuously published in New York City since 1851. The New York Times has won 106 Pulitzer Prizes, the most of any news organization...
's former ownership of WQXR
WQXR-FM
WQXR-FM is an American classical radio station licensed to Newark, New Jersey, and serving the New York City metropolitan area. It is the most-listened-to classical-music station in the United States, with an average quarter-hour audience of 63,000...
Radio and the Chicago Tribune
Chicago Tribune
The Chicago Tribune is a major daily newspaper based in Chicago, Illinois, and the flagship publication of the Tribune Company. Formerly self-styled as the "World's Greatest Newspaper" , it remains the most read daily newspaper of the Chicago metropolitan area and the Great Lakes region and is...
s similar relationship with WGN Radio (WGN-AM) and Television (WGN-TV
WGN-TV
WGN-TV, virtual channel 9 , is the CW-affiliated television station in Chicago, Illinois built, signed on, and owned by the Tribune Company. WGN-TV's studios and offices are located at 2501 W...
).
The Federal Communications Commission
Federal Communications Commission
The Federal Communications Commission is an independent agency of the United States government, created, Congressional statute , and with the majority of its commissioners appointed by the current President. The FCC works towards six goals in the areas of broadband, competition, the spectrum, the...
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
News Corporation or News Corp. is an American multinational media conglomerate. It is the world's second-largest media conglomerate as of 2011 in terms of revenue, and the world's third largest in entertainment as of 2009, although the BBC remains the world's largest broadcaster...
and the Tribune Company
Tribune Company
The Tribune Company is a large American multimedia corporation based in Chicago, Illinois. It is the nation's second-largest newspaper publisher, with ten daily newspapers and commuter tabloids including Chicago Tribune, Los Angeles Times, Hartford Courant, Orlando Sentinel, South Florida...
have in New York.
The mid-1970s cross-ownership guidelines grandfathered already-existing crossownerships, such as Tribune-WGN, New York Times-WQXR and the New York Daily News
New York Daily News
The Daily News of New York City is the fourth most widely circulated daily newspaper in the United States with a daily circulation of 605,677, as of November 1, 2011....
ownership of WPIX
WPIX
WPIX, channel 11, is a television station in New York City built, signed on, and owned by the Tribune Company. WPIX also serves as the flagship station of The CW Television Network...
Television and Radio.