The Case Study of Cross-Shareholding between ZHENYE and CHANGCHENG

Abstract

The phenomenon of cross-shareholding in China was formed in the 1990s. Domestic and foreign scholars have studied the motives and effects of the formation of cross-shareholding system, but there are few specific case studies, especially the cross-shareholding formed by the government. Therefore, this paper will study the cross-shareholding case. Shenzhen Zhenye (Group) Co., Ltd. (“ZHENYE” for short) and Shenzhen Changcheng Investment Holding Co., Ltd. (“CHANGCHENG” for short) held each other’s shares from 1995 to 2013, which lasted 18 years. This cross-shareholdings relationship promoted by the government brought both positive and negative effects to ZHENYE. This article analyzes the effects to ZHENYE and give suggestions to the cross-shareholdings companies: 1) in order to prevent hostile takeover, the cross-shareholdings companies should consider the percentage of cross-shareholdings or cooperate with more than one company; 2) making an alliance with other companies will benefit the long-term development of the company; 3) cross-shareholdings can be a new way of transformation of the state-owned enterprises.