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Foundation ownership and financial performance. Do companies need owners?

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  • Thomsen, Steen

    (Department of Finance, Copenhagen Business School)

  • Rose, Caspar

    (Department of Finance, Copenhagen Business School)

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    Abstract

    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.

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    File URL: http://openarchive.cbs.dk/cbsweb/handle/10398/7198
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    Bibliographic Info

    Paper provided by Copenhagen Business School, Department of Finance in its series Working Papers with number 2002-3.

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    Length: 32 pages
    Date of creation: 09 Apr 2002
    Date of revision:
    Handle: RePEc:hhs:cbsfin:2002_003

    Contact details of provider:
    Postal: Department of Finance, Copenhagen Business School, Solbjerg Plads 3, A5, DK-2000 Frederiksberg, Denmark
    Phone: +45 3815 3815
    Email:
    Web page: http://www.cbs.dk/departments/finance/
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    Related research

    Keywords: ownership; Northern Europe; foundations; non-profit entities; corporate control; Denmark;

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