Partial vertical ownership describes a situation in which a firm holds financial shares either in its supplier (referred to as partial backward integration) or in its customer (partial forward integration). We study the effect of such financial interconnectedness on two operational decisions: capacity investment and information exchange. In our model, a retailer, who has superior information about the future market demand, possesses some level of passive financial holdings in the supplier. Although this passive financial investment does not enable the retailer to directly influence the supplier’s operational decisions, it does affect the market equilibrium. Specifically, financial interconnectedness between the firms can result in the retailer financing the entire capacity in the market. In addition, we characterize the conditions that ensure information between the retailer and the supplier can be exchanged by “cheap-talk” communication. When “cheap talk” is not possible, we study the separating equilibrium that is achieved by the retailer’s commitment to order in advance. Interestingly, this advance order can be either decreasing or increasing with respect to the level of the financial holdings.