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Foundation ownership and financial performance. Do companies need owners?

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Author Info
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.

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File URL: http://openarchive.cbs.dk/cbsweb/handle/10398/7198
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Publisher Info
Paper provided by Copenhagen Business School, Department of Finance in its series Working Papers with number 2002-3.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
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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For technical questions regarding this item, or to correct its listing, contact: (Lars Nondal).

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

Find related papers by 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

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Hansmann, Henry, 1988. "Ownership of the Firm," Journal of Law, Economics and Organization, Oxford University Press, vol. 4(2), pages 267-304, Fall.
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    Other versions:
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    Other versions:
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    Other versions:
  12. Demsetz, Harold, 1983. "The Structure of Ownership and the Theory of the Firm," Journal of Law & Economics, University of Chicago Press, vol. 26(2), pages 375-90, June.
  13. Steen Thomsen, 1999. "Corporate Ownership by Industrial Foundations," European Journal of Law and Economics, Springer, vol. 7(2), pages 117-137, March. [Downloadable!] (restricted)
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  16. Shleifer, Andrei & Vishny, Robert W, 1997. " A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-83, June. [Downloadable!] (restricted)
    Other versions:
  17. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December. [Downloadable!] (restricted)
    Other versions:
  18. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May. [Downloadable!] (restricted)
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    Other versions:
  22. Charles P. Himmelberg & R. Glenn Hubbard & Darius Palia, 2000. "Understanding the Determinants of Managerial Ownership and the Link Between Ownership and Performance," NBER Working Papers 7209, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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