<p>You can have both cases: X=Y=100 and X=Y=0 in your accounting. Both companies show the shares of the other company in their books. If you check the balance sheet of A and B respectively, you will find the other company's shares in the books. If you need a consolidated financial statement, both positions will be netted. I suspect you understand and speak a bit German, plz. check for the book &quot;Der Konzernabschluss&quot; from Küting and Weber.. There you will find all the nasty details about how to do it and what it means economically :-)
Hope this helps
Thomas</p>

CC BY-SA 4.0
2022-04-01T08:31:19.840Z
Thanks a lot. Can you name the chapter in the book I should read?
Hans-Peter Stricker
CC BY-SA 4.0
2022-04-01T09:49:38.720Z
I'm not sure where they wrote it in the current edition as my old version is from 2003, but you will find the relevant chapters by checking for "Kapitalkonsolidierung"
T123
CC BY-SA 4.0
2022-04-04T18:49:18.590Z
Ah, I forgot one thing. It also depends how much company A owns from B and B from A. If the share is less than 100% then you need to disentangle both shares as A has B but B owns A which owns a share of B and so on. In this case you need to apply a multiplicator to boil it down to the effective share of how much A owns of B net of its own shares through B. See the book I suggested, you will find the multiplicator there. This addresses your question with x=y=50%
T123
CC BY-SA 4.0
2022-04-01T08:23:32.147Z
2022-04-01T08:23:32.147Z
T123
<p>I do not think X=Y=100 is logically wrong. Shares are traded on their perceived value. If the sellers' perceived value is low A and B can simultaneously buy all the shares in the other. A would control B and B would control A and that is a logical paradox.</p>
<p>It would be weirder if the transactions are not simultaneous. A can buy all the shares of B, perhaps when the share price of A is high so B is not tempted to be a buyer of the shares of A. Then the share price of A can become lower for unrelated reasons and the subsidiary that is B can buy all the shares of A.</p>
<p>Japanese companies famously had or have extensive cross-shareholdings.</p>

CC BY-SA 4.0
2022-03-30T23:10:17.977Z
2022-03-31T19:23:43.547Z
2022-03-31T19:23:43.547Z
H2ONaCl
<p>There is no logical flaw in having two companies A and B mutually owning each other. Company A may hold X% of the shares of company B, and company B may hold Y% of the shares of company A. I assume this happens rather often.</p>
<p>What I wonder about: Are there (logical) restrictions of possible values of X and Y? I guess X=Y=100 would not make sense (while X=Y=0 is the normal case). Are there known examples of X=Y=50?</p>

<firm><theory-of-the-firm><capital-structure><transparency>
Companies mutually owning each other
Hans-Peter Stricker
# Companies mutually owning each other

(Asked by: username_0 on 2022-03-30)

There is no logical flaw in having two companies A and B mutually owning each other. Company A may hold X% of the shares of company B, and company B may hold Y% of the shares of company A. I assume this happens rather often.

What I wonder about: Are there (logical) restrictions of possible values of X and Y? I guess X=Y=100 would not make sense (while X=Y=0 is the normal case). Are there known examples of X=Y=50?

**Tags:** firm, theory-of-the-firm, capital-structure, transparency

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## 2 answers

### Answer by username_1 on 2022-04-01. Score: 3

You can have both cases: X=Y=100 and X=Y=0 in your accounting. Both companies show the shares of the other company in their books. If you check the balance sheet of A and B respectively, you will find the other company's shares in the books. If you need a consolidated financial statement, both positions will be netted. I suspect you understand and speak a bit German, plz. check for the book "Der Konzernabschluss" from Küting and Weber.. There you will find all the nasty details about how to do it and what it means economically :-)
Hope this helps
Thomas

> **Comments:**
> **username_0**: Thanks a lot. Can you name the chapter in the book I should read?  
> **username_1**: I'm not sure where they wrote it in the current edition as my old version is from 2003, but you will find the relevant chapters by checking for "Kapitalkonsolidierung"  
> **username_1**: Ah, I forgot one thing. It also depends how much company A owns from B and B from A. If the share is less than 100% then you need to disentangle both shares as A has B but B owns A which owns a share of B and so on. In this case you need to apply a multiplicator to boil it down to the effective share of how much A owns of B net of its own shares through B. See the book I suggested, you will find the multiplicator there. This addresses your question with x=y=50%  

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### Answer by username_2 on 2022-03-30. Score: 1

I do not think X=Y=100 is logically wrong. Shares are traded on their perceived value. If the sellers' perceived value is low A and B can simultaneously buy all the shares in the other. A would control B and B would control A and that is a logical paradox.

It would be weirder if the transactions are not simultaneous. A can buy all the shares of B, perhaps when the share price of A is high so B is not tempted to be a buyer of the shares of A. Then the share price of A can become lower for unrelated reasons and the subsidiary that is B can buy all the shares of A.

Japanese companies famously had or have extensive cross-shareholdings.


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