Industrial Foundations as Long‐Term Owners

17 Pages Posted: 5 Jun 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: May 2018

Abstract

Manuscript Type. Empirical. Research Question/Issue. Does foundation ownership lead to long‐term corporate governance and business behavior in foundation‐owned companies?. Research Findings/Insights. 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. Theoretical/Academic Implications. This paper supports the hypothesis that time horizons are influenced by ownership commitment and particularly that industrial foundations promote long‐termism. We contribute to the corporate governance literature by further developing the concept of long‐termism as a multi‐faceted corporate governance concept associated with ownership commitment. We also show that foundation ownership is associated with long‐termism. Practitioner/Policy Implications. Policymakers interested in promoting long‐termism should encourage long‐term ownership, for example by industrial foundations. Practitioners should consider the importance of ownership commitment in ensuring long‐term corporate governance.

Keywords: Corporate Governance, Industrial Foundations, Long‐termism

Suggested Citation

Thomsen, Steen and Poulsen, Thomas and Børsting, Christa and Kuhn, Johan, Industrial Foundations as Long‐Term Owners (May 2018). Corporate Governance: An International Review, Vol. 26, Issue 3, pp. 180-196, 2018. Available at SSRN: https://ssrn.com/abstract=3188568 or http://dx.doi.org/10.1111/corg.12236

Steen Thomsen (Contact Author)

Copenhagen Business School ( email )

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

Thomas Poulsen

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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