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Stakeholder Rights and Economic Performance: The Profitability of Nonprofits

37 Pages Posted: 16 Jul 2013 Last revised: 10 Aug 2017

Øyvind Bøhren

BI Norwegian Business School - Department of Finance

Morten G. Josefsen

Financial Supervisory Authority of Norway

Date Written: June 10, 2013

Abstract

This paper explores whether ownership matters in a fundamental sense by comparing the performance of stockholder-owned firms with the much less analyzed nonprofit firms. No stakeholder has residual cash flow rights in nonprofit firms, and the control rights are held by customers, employees, and community citizens. Accounting for differences in size and risk and comparing only firms in the same industry, we find that stockholder-owned firms do not outperform nonprofit firms. This result is consistent with the notion that the monitoring function of stockholders may be successfully replaced by other mechanisms. We find evidence that product market competition may play this role as a substitute monitoring mechanism.

Keywords: Corporate governance, Stakeholders, Nonprofits, Competition, Banks

JEL Classification: G34, L33

Suggested Citation

Bøhren, Øyvind and Josefsen, Morten G., Stakeholder Rights and Economic Performance: The Profitability of Nonprofits (June 10, 2013). Journal of Banking and Finance 37, 2013, 4073-4086.. Available at SSRN: https://ssrn.com/abstract=2294254

Øyvind Bøhren (Contact Author)

BI Norwegian Business School - Department of Finance ( email )

N-0442 Oslo
Norway

Morten G. Josefsen

Financial Supervisory Authority of Norway ( email )

Akersgata 40
PO Box 8008 Dep.
Oslo, 0030
Norway

HOME PAGE: http://www.finanstilsynet.no

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