Scandinavian Working Papers in Economics

Working Papers,
Copenhagen Business School, Department of Finance

No 2002-3: Foundation ownership and financial performance. Do companies need owners?

Steen Thomsen and Caspar Rose
Additional contact information
Steen Thomsen: Department of Finance, Copenhagen Business School, Postal: Department of Finance, Copenhagen Business School, Solbjerg Plads 3, A5, DK-2000 Frederiksberg, Denmark
Caspar Rose: Department of Finance, Copenhagen Business School, Postal: Department of Finance, Copenhagen Business School, Solbjerg Plads 3, A5, DK-2000 Frederiksberg, Denmark

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.

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

JEL-codes: G10; G18; L30; L31

32 pages, April 9, 2002

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