Foundation ownership and financial performance. Do companies need owners?

A curious ownership structure is found in Northern Europe – foundations that own and operate business companies. The foundations are non-profit entities, they have no members and no owners, and they cannot be dissolved, but regard it as a goal in itself to run a business. In many cases these entities control more than 50% of the votes in successful international companies such as Carlsberg and IKEA. Obviously this structure completely blocks the market for corporate control, but it also violates other basic principles of agency theory and corporate finance: the personal profit motive and portfolio diversification of risk. Nevertheless we present evidence that a sample of foundation-owned companies listed on the Copenhagen Stock Exchange are at least as efficient as other listed companies in terms of risk adjusted stock returns, accounting returns and firm value (Tobin’s Q). These findings have potentially important implications for the theory of the firm, in particular they question whether profit-seeking ownership is a necessary condition for competitive enterprise. They also invite caution against forcing a harmonization of European corporate governance to Anglo-American standards.