Foundation Ownership and Economic Performance in the Industry of Consulting Engineers and Architects

Tanja Brejtenstein Jensen

Student thesis: Master thesis


Industrial foundations are self-governing, non-profit organizations with a large ownership stake in a business company. This peculiar ownership structure is found in Northern Europe where they exist in many different industries. According to agency theory the link between ownership structure, incentives and risk diversification plays a key role in the efficient operation of a business company and will determine economic performance. Foundation ownership however, is absent from both risk and incentive efficiency. By nature foundation ownership therefore constitutes a paradox to the fundamental beliefs of agency theory and is expected to be inefficient in terms of performance. Nevertheless, the empirical findings provided in this thesis indicate a different reality. This thesis examines the economic performance of foundation-owned companies using accounting data drawn from a sample of the 300 largest European companies within the industry of consulting engineers and architects. By doing so this research seeks to contribute with new findings on the performance of foundation ownership within an industry and across national borders. Moreover, by investigating data from the 5-year period 2006 to 2010 the recent global financial crisis is exploited as a natural experiment to detect actual performance differences. This is effective because firms are shocked out of their equilibrium and any real costs or benefits of foundation ownership will be observable from an external point of view. From the results it is found that foundation-owned companies are competitive and efficient since their performance in terms of accounting profitability is found not to be significantly worse compared to other ownership structures. There are several indications, however that foundation-owned companies behave differently. Foundation ownership compared to corporations is found to incur less financial risk measured by systematically higher equity ratios and lower volatility of returns. Foundation-owned companies are also found to be larger in terms of size. Finally, it is found that foundation-owned companies compared to other ownership categories experienced a more severe impact on performance during the financial crisis. In sum, these results indicate some differences in the behavior of foundation-owned companies that are beneficial but also costly for their performance. Overall this thesis contributes to the literature by examining the performance of foundation-owned companies in a given industry and across national borders. Furthermore, this study makes an attempt to mitigate the problem of endogeneity by exploiting the financial crisis as a natural experiment to observe any real benefits and costs of foundation ownership.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
Publication date2013
Number of pages101