Interesting thought on cross-ownership

Reading the Byrne’s Eye View blog today, I stumbled across an interest notion of cross-ownership of companies (i.e, both companies owning a piece of each other). His thoughts are based on the news that Citic, China’s largest investment bank, and Bear Stearns, one of the largest US investment banks, are planning on swapping ownership stakes. I’m thinking of this in terms of a half merger; these companies don’t quite want to merge, but they’d still like to have some formal connection as they move into the future.  Byrne made an interesting point:

 This was apparently one of the problems with Japanese equity markets in the 80’s. If A, B, C, and D were connected in a chain of cross-ownership, A’s good quarter (in operations) could show up on B’s P&L thanks to trading, which would boost C’s results, which, in turn, would give D’s balance sheet enough heft for it to issue more debt, which it would lend to A, which would…

I’d love to see if any Australian companies have some kind of cross-ownership going. It’d make for interesting analysis. And when I say interesting, I of course, mean nerdy.