Foundation-owned firms in Germany: The impact of foundation-ownership on firm performance and corporate governance challenges Dissertation am Fachbereich IV – Wirtschafts- und Sozialwissenschaften der Universität Trier zur Erlangung eines Doktors der Wirtschaftswissenschaften (Dr. rer. pol.) vorgelegt von: Florian Hosseini-Görge M.Sc. Erstgutachter: Univ. – Prof. Dr. Jörn Henrich Block Professur für Unternehmensführung Universität Trier Zweitgutachter: Univ. – Prof. Dr. André Betzer Lehrstuhl für Finanzwirtschaft und Corporate Governance Bergische Universität Wuppertal Einreichung am: 30.08.2018 Disputation am: 23.11.2018 Preface Preface Foundation-owned firms have become increasingly popular in Germany and are a very attractive alternative to traditional succession solutions for many entrepreneurs. Due to the diverging goals pursued by foundations and firms, a large number of potential conflicts and challenges arise which need to be solved by both the foundation and the firm. This dissertation provides insights into the complex world of foundation-owned firms and is intended to help to better understand and apply this type of firm. My dissertation could not have been realized without the help of my supervisors, my colleagues, my family and friends. I would like to take this opportunity to thank those who helped me to realize this challenging project. First of all I would like to thank my supervisor Prof. Dr. Jörn Block for giving me the opportunity to write my dissertation on this topic. He always gave me help and advice and without him this dissertation would not have been possible. I am very grateful to him for his amazing support and I cannot thank him enough for giving me this chance. I am also very grateful to my second supervisor Prof. Dr. André Betzer. He was always available for me and gave me valuable advices and supported me at any time. Next I would like to thank Prof. Dr. Dr. Ann-Kristin Achleitner for her magnificent support. I had some valuable discussions with her on the subject of foundation-owned firms and the collaboration with her as co-author was very fruitful and straightforward. Of course I would also like to thank my other co-authors Prof. Dr. Nadine Kammerlander, Dr. Svenja Jarchow and Dmitry Bazhutov for the great cooperation and the critical examination of the topic. Furthermore I would like to thank Ruppert Graf Strachwitz, Peter May and Hans Peter Rosenthal as well as the entire Jackstädt-Foundation for their great cooperation and support. I II am very pleased that together we have succeeded in turning our scientific findings into a practical transfer. I would especially like to thank my former office mate Dr. Christian Fisch for the great 4 years. We had a lot of fun and always supported each other in case of problems and have become good friends in this time. I am also very thankful to all other (former) colleagues at the Chair of Management for their helpful support during our numerous workshops and coffee breaks. I would like to thank the following people: Dr. Alexander Krieger, Dr. Alexandra Moritz, Dr. Andreas Landgraf, Arezou Abbasianchavari, Christian Masiak, Christopher Hansen, Farooq Rehan, Dr. Guoqian Xi, Lilli Leirich, Michaela Hausdorf, Mirko Hirschmann, René Andres, Silvia Moyses- Scheingruber, Stephan Hock, Stephan Hossinger, Dr. Stephanie Smith-Eckhardt, Thi Lanh Nguyen and Walter Diegel. I would also like to thank Gerti Meerkamp, Hala Jaber, Janina Lossjew, Lena Benz, Lina Alirzania, for their help and support during my dissertation. I in addition would like to thank my colleagues Markus Widmann and Tilmann Henrich for the Doctoral Colloquium on Mallorca, which also contributed very much to the preparation of this dissertation. Furthermore, I am thankful to my friends Denis Holdeew, Philipp Blatton and Mattheo Ens, with whom I could also discussed my topic and who supported me in difficult times. Above all, I would like to thank my family for the support, especially my parents Elke and Mehdi. Finally, my greatest thanks go to my wife Johanna and my daughter Emilia. Without my wife’s patience, support and encouragements, this project would not have been possible. III Table of contents Table of contents Preface ...................................................................................................................................... II Table of contents ..................................................................................................................... IV List of tables .......................................................................................................................... VII List of figures ....................................................................................................................... VIII List of abbreviations ............................................................................................................... IX Zusammenfassung .................................................................................................................. XI 1. Introduction .......................................................................................................................... 1 1.1 Motivation and research goals .......................................................................................... 1 1.2 Structure of the dissertation .............................................................................................. 3 2. Theoretical framework and definitions .............................................................................. 7 2.1 Foundations ...................................................................................................................... 7 2.1.1 Definition ................................................................................................................... 7 2.1.2 How to establish a foundation? .................................................................................. 8 2.1.3 Types of foundations ................................................................................................ 10 2.2 Foundation-owned firms ................................................................................................. 11 2.2.1 Definition ................................................................................................................. 11 2.2.2 How to establish a foundation-owned firm? ............................................................ 12 2.2.3 Types of foundation-owned firms ............................................................................ 14 2.3 Advantages and disadvantages of foundation-owned firms ........................................... 16 2.3.1 Advantages ............................................................................................................... 16 2.3.2 Disadvantages .......................................................................................................... 17 2.3.3 Summary .................................................................................................................. 18 3. Differentiation between foundation-owned firms and family firms .............................. 21 3.1 Introduction .................................................................................................................... 21 3.2 Family firms and the “three-circle model” ..................................................................... 22 3.3 Transferring the three-circle model to foundation-owned firms .................................... 25 IV Table of contents 3.4 Summary ......................................................................................................................... 31 4. Performance differences between different types of foundation-owned firms ............. 35 4.1 Introduction .................................................................................................................... 35 4.2 Literature review on performance of foundation-owned firms ................................. 36 4.3 Hypotheses about performance differences between different types of foundation- owned firms .......................................................................................................................... 37 4.4 Data and method ............................................................................................................. 44 4.5 Results ............................................................................................................................ 50 4.6 Summary ......................................................................................................................... 54 5. Foundation ownership and shareholder value: The case of listed foundation-owned firms .................................................................................................................................... 57 5.1 Introduction .................................................................................................................... 57 5.2 Literature Review ........................................................................................................... 59 5.3 Hypotheses about shareholder value effects of foundation ownership .......................... 63 5.4 Event study method ........................................................................................................ 65 5.5 Sample and results of the event study analysis ............................................................... 68 5.6 Summary ........................................................................................................................