Foundation Owned Firms in Germany - A Field Experiment for Agency Theory

51 Pages Posted: 1 Nov 2014 Last revised: 20 Feb 2015

See all articles by Matthias Draheim

Matthias Draheim

University of Konstanz - Department of Economics

Guenter Franke

University of Konstanz - Department of Economics

Date Written: February 19, 2015

Abstract

This paper analyzes the governance and performance of firms which, according to simplistic agency theory, should not be viable. These firms are fully or partially owned by a foundation which itself is not owned by natural or legal persons. Therefore, residual claimholders have restricted or no influence on corporate governance. The lack of owners strengthens other stakeholders, in particular employees. Relative to matching family firms, German foundation owned firms are larger in terms of employees and operating revenue, and substitute labor for material, but not for capital. Their hiring and firing policy is about the same. They follow a more conservative financing policy, their financial performance is somewhat weaker.

Keywords: foundation owned firms, agency theory, corporate finance, corporate governance

JEL Classification: G32, G34, G35, L25

Suggested Citation

Draheim, Matthias and Franke, Guenter, Foundation Owned Firms in Germany - A Field Experiment for Agency Theory (February 19, 2015). Available at SSRN: https://ssrn.com/abstract=2517257 or http://dx.doi.org/10.2139/ssrn.2517257

Matthias Draheim (Contact Author)

University of Konstanz - Department of Economics ( email )

Konstanz, D-78457
Germany

Guenter Franke

University of Konstanz - Department of Economics ( email )

Fach 147
Konstanz, 78457
Germany
+49 7531 88 2545 (Phone)
+49 7531 88 3559 (Fax)

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