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Foundation ownership and financial performance. Do companies need owners?

Author

Listed:
  • Thomsen, Steen

    (Department of Finance, Copenhagen Business School)

  • Rose, Caspar

    (Department of Finance, Copenhagen Business School)

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.

Suggested Citation

  • Thomsen, Steen & Rose, Caspar, 2002. "Foundation ownership and financial performance. Do companies need owners?," Working Papers 2002-3, Copenhagen Business School, Department of Finance.
  • Handle: RePEc:hhs:cbsfin:2002_003
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    File URL: http://openarchive.cbs.dk/cbsweb/handle/10398/7198
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    References listed on IDEAS

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    Cited by:

    1. Veronica Binda & Martin Jes Iversen, 2007. "Towards a 'Managerial Revolution' in European Business? The transformation of Danish and Spanish Big Business, 1973-2003," Business History, Taylor & Francis Journals, vol. 49(4), pages 506-530.
    2. Martin Jes Iversen & Mats Larsson, 2011. "Strategic transformations in Danish and Swedish big business in an era of globalisation, 1973-2008," Business History, Taylor & Francis Journals, vol. 53(1), pages 119-143.

    More about this item

    Keywords

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

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • L30 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - General
    • L31 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Nonprofit Institutions; NGOs; Social Entrepreneurship

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