Determinants of Intercorporate Shareholdings

31 Pages Posted: 1 Jun 2013 Last revised: 10 Aug 2017

See all articles by Øyvind Bøhren

Øyvind Bøhren

BI Norwegian Business School; European Corporate Governance Institute (ECGI)

Oyvind Norli

BI Norwegian Business School - Department of Financial Economics

Date Written: March 1, 1997


This paper examines why firms choose to spend resources on acquiring ownership rights in other firms. Based on a unique data base of every individual intercorporate shareholding on the Oslo Stock Exchange during the period 1980-1994, we find that such investments serve at least three functions. First, they play a role in corporate governance, as managers in firms with low insider holdings, diffuse ownership structure, and high free cash flow tend to mutually acquire equity stakes in each other, possibly in a collective attempt to protect their human capital in the market for corporate control. Second, interfi rm equity holdings serve as financial slack for growing firms, reducing potential adverse selection costs by providing an internal funding source for new investments in long-term assets. Finally, our findings also suggest that intercorporate shareholdings are an integrated part of the investor's cash flow management system by being a liquidity buff er when cash inflows and cash outflows are non-synchronous.

Keywords: Corporate governance, Intercorporate shareholdings

JEL Classification: G3, G34

Suggested Citation

Bøhren, Øyvind and Norli, Oyvind, Determinants of Intercorporate Shareholdings (March 1, 1997). European Finance Review 1, 1997, 265-287., Available at SSRN:

Øyvind Bøhren (Contact Author)

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
46410503 (Phone)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

Oyvind Norli

BI Norwegian Business School - Department of Financial Economics ( email )

Nydalsveien 37
Oslo, N-0442
+4746410514 (Phone)

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