Corporate Cross-Ownership and Market Aggregates: Oslo Stock Exchange 1980-1990

Posted: 28 Jun 2013 Last revised: 10 Aug 2017

See all articles by Øyvind Bøhren

Øyvind Bøhren

BI Norwegian Business School

Dag Michalsen

BI Norwegian Business School

Date Written: August 1, 1994

Abstract

Corporate cross-ownership results in double counting of assets in the market's valuation of total equity. This paper is the first to use firm-specific data to measure the resulting bias in market capitalization, market portfolio return, capital structure, and the P/E ratio. Based on the population of firms on the Oslo Stock Exchange, we found substantial distortions of market aggregates: The average size of the equity market was overstated by 20%, financial leverage was underestimated by 7%, and the market portfolio return was underestimated by 31%. Double counted earnings offset the bias in market capitalization, leaving the P/E almost undistorted.

Keywords: Cross-ownership, Double-counting, P/E, market returns

JEL Classification: G11, B15

Suggested Citation

Bøhren, Øyvind and Michalsen, Dag, Corporate Cross-Ownership and Market Aggregates: Oslo Stock Exchange 1980-1990 (August 1, 1994). Journal of Banking and Finance 18, 1994, 687-704. Available at SSRN: https://ssrn.com/abstract=2286267

Øyvind Bøhren (Contact Author)

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway
46410503 (Phone)

Dag Michalsen

BI Norwegian Business School ( email )

Nydalsveien 37
N-0442 Oslo, N-0442
Norway
4746410512 (Phone)

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