Strategic Stake Acquisitions in Rival Firms: Common vs. Cross-Ownership

Vincenzo Denicolo and Fausto Panunzi

No 19204, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper examines the problem of a blockholder who controls a firm and seeks to acquire a noncontrolling stake in a rival company. The blockholder can either purchase the stake directly using personal funds or indirectly, through the firm he controls. The first option results in a pattern of common ownership, while the second leads to cross-ownership. We show that common ownership reduces competition intensity more effectively than cross-ownership and allows the blockholder to retain the benefits of the acquisition without sharing them with minority shareholders. However, this may create conflicts of interest with those shareholders, whereas cross-ownership always maintains an alignment of interests. Consequently, the blockholder may prefer cross-ownership if control over his company is not secure and could be challenged by minority shareholders.

Keywords: Competition (search for similar items in EconPapers)
Date: 2024-07
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP19204 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:19204

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP19204

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().