New Working Paper uploaded on SSRN: Foundation ownership and shareholder value: An event study
A new Working paper by Ann-Kristin Achleitner (CEFS), Dmitry Bazhutov and André Betzer (University of Wuppertal) and Jörn Block and Florian Hosseini (University of Trier) was uploaded on SSRN
Some of the largest listed firms in Germany are partly owned by foundations. These foundations can have charitable or private purposes. So far, little research exists about the shareholder value effects of foundation ownership. This study aims to close this gap using an event study method. We find that equity markets show a positive reaction following the announcement by a foundation that it intends to decrease its ownership share, whereas we find no reaction following the announcement by a foundation that it intends to increase its ownership share. Excluding private foundations from our sample and restricting our sample to charitable foundations produces similar results. We further find that the 25% equity threshold plays a key role with respect to the shareholder value effects of foundation ownership. Our study shows that equity markets are skeptical about foundations as shareholders. Future research is needed to determine whether this skepticism is due to monitoring problems of foundations, goal divergences between foundations and firms, foundations being hybrid organizations with multiple goals, or legal restrictions that come with this particular form of firm ownership.
The paper can be downloaded here.