Main Page | See live article | Alphabetical index Cross ownership is a method of reinforcing business relationships by owning stock in the companies with which a given company does business. Some countries where cross ownership of shares is a major part of the business culture are: Japan Germany 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 critized 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. This article is from Wikipedia. All text is available under the terms of the GNU Free Documentation License.