Foundation ownership and shareholder value: an event study

Abstract

Some of the largest listed firms in Western and Northern Europe are partly owned by foundations. So far, little research exists about the shareholder value effects of foundation ownership. This study aims to close this gap using an event study method. We find that equity markets show a positive reaction following the announcement by a foundation that it intends to decrease its ownership share, whereas we find no reaction when a foundation announces that it intends to increase its ownership share. The positive reaction to an announcement of an ownership share decrease is particularly strong when a foundation holds an equity stake of less than 25%. Further investigations show that our findings are specific for foundations as blockholders and do not occur with other blockholders. Overall, our study shows that equity markets are skeptical about foundations as shareholders. Future research is needed to determine whether this skepticism is due to monitoring problems of foundations, goal divergences between foundations and firms, foundations being hybrid organizations with multiple goals, or legal restrictions that come with this particular form of firm ownership.

Public family firms and capital structure: A meta‐analysis

“…This view could explain the lower leverage ratios in Scandinavian countries in our results, because many primary studies do not clearly distinguish between foundation and family ownership. On the other hand, there could also be a necessity for foundation-owned firms to rely more on debt finance because they might be bound by their charter to always retain a majority stake in the firm (Achleitner, Bazhutov, Betzer, Block, & Hosseini, 2020;Block, Jarchow, Kammerlander, Hosseini, & Achleitner, 2020). To conclude, more research on family firm heterogeneity and its impact on capital structure decisions, combined with the impact of the institutional environment, is needed.…”