Abstract: With Chinese stock market entering into the “full circulation” era, the cases around control of the listed companies are more and more, and management′s resisting the acquisitions of potential acquirers through harming shareholders′ interests is also common. The paper examines its effects on the interests of the company′s atomistic shareholders, managers, and potential receivers who may have control, by discussing inter-firm cross-holdings. The study finds that if there is a sanction between cross-share companies that ensures company does not sell shares of other companies, cross-holdings will benefit all parties involved in the game, and the company′s managers can focus on the long-term interest, and will not take short-sighted acts that harm the value of the company in order to circumvent the threat of potential acquirers. The conclusion provides new theoretical evidence for the impact of cross-shareholding on corporate performance, that is, cross-shareholdings helps managers select investment projects that increase corporate value to enhance corporate performance and value.

Key words: corporate control, project choice, cross- shareholdings model