Profit-driven vs. purpose-driven? A study of the prevalence and implications of foundation ownership

Abstract: Examining the Stockholm Stock Exchange between 1999-2017, we find that foundation-owned firms on average stand for about 50 percent of the total market capitalization and 15 percent of the total number of firms, illustrating the large prevalence and implications foundations have on the Swedish business society. We identify four different categories of foundations; Family, Non-Family, Employee, and Government foundations, where the first is the largest regarding both total firms and total market capitalization. The results on operational performance using t-tests and pooled-OLS regressions, although varying depending on the performed statistical test, are at odds with what would be expected by common corporate governance literature. Despite the lack of residual claim, return on book equity seems to increase with foundation ownership, primarily observed for Non-Family and Employee foundations. Moreover, compared to firms with no foundation ownership, foundation-owned firms have higher payout-ratios in-line with expectations presumably due to charitable commitments. Controlling for firm size, our results also indicate that foundation-owned firms have more conservative capital structures, which could support that foundations are more long-term oriented.