Industrial Foundations as Long-Term Owners

60 Pages Posted: 2 Feb 2016 Last revised: 16 Nov 2018

See all articles by Steen Thomsen

Steen Thomsen

Copenhagen Business School

Thomas Poulsen

Copenhagen Business School, Department of International Economics and Management, Center for Corporate Governance

Christa Børsting

Copenhagen Business School - Department of International Economics and Management, Students

Johan Kuhn

Copenhagen Business School

Multiple version iconThere are 2 versions of this paper

Date Written: March 1, 2018

Abstract

Short-termism has become a serious concern for corporate governance, and this has inspired a search for institutional arrangements to promote long-term decision-making. In this paper, we call attention to long-term ownership by industrial foundations, which is common in Northern Europe but little known in the rest of the world. We use a unique Danish data set to document that industrial foundations are long-term owners that practice long-term governance. We show that foundation ownership is highly stable compared to other ownership structures. Foundation-owned companies replace managers less frequently. They have conservative capital structures with low financial leverage. They score higher on an index of long-termism in finance, investment, and employment. They survive longer. Overall, our paper supports the hypothesis that corporate time horizons are influenced by ownership structures and particularly that industrial foundations possess characteristics that promote long-termism. Policymakers, business owners, and managers interested in promoting long-term governance models should therefore reconsider the role of ownership structure.

Keywords: Corporate Governance, Industrial foundations, Long-termism

JEL Classification: G34

Suggested Citation

Thomsen, Steen and Poulsen, Thomas and Børsting, Christa and Kuhn, Johan, Industrial Foundations as Long-Term Owners (March 1, 2018). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 556/2018. Available at SSRN: https://ssrn.com/abstract=2725462 or http://dx.doi.org/10.2139/ssrn.2725462

Steen Thomsen

Copenhagen Business School ( email )

Porcelaenshaven 24A
Copenhagen, 2000
Denmark
+45 38152590 (Phone)
+45 38152500 (Fax)

Thomas Poulsen (Contact Author)

Copenhagen Business School, Department of International Economics and Management, Center for Corporate Governance ( email )

Porcelaenshaven 24
Frederiksberg, 2000
Denmark

Christa Børsting

Copenhagen Business School - Department of International Economics and Management, Students ( email )

Denmark

Johan Kuhn

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

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