Saturday, June 18, 2005

Should we ban cross holding between companies?

A ban for company holding shares in other company will prohibit the company to grow and restrict investment for the benefit of their shareholders. This will in turn restrict economic growth generally. Corporation should be allowed to invest in other businesses to balance their risks. A conglomerate with diversified interests in different type of businesses will be able balance risks of the portfolio of different trades/industries to ensure stable return of investment. Many industries require also vertical integration to stay competitive by reducing transaction costs and gain from economic of scale.

No comments:

Post a Comment