Working Papers,
Copenhagen Business School, Department of Finance

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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