Men, Swedish speakers and Master's degree holders most likely to own shares in unlisted companies

Samuli Knüpfer, Professor of Ownership at the School of Business, has mapped the ownership of unlisted privately held firms for the period 2006–2022 in a recent study based on data collected by Statistics Finland from the Tax Administration, among others. This is the first comprehensive analysis of the ownership of Finnish privately held firms. 

"Privately held firms controlled by individuals are important for the Finnish economy. I find that they represent 86% of the 106,000 limited liability companies studied. Although many of these companies are relatively small, together they are of great economic importance. They account for 30% of total revenue and 49% of employment," says Knüpfer. 

Owning privately held firms is rare 

Only 170,000 people own shares in privately held firms, which amounts to 3% of the population. Compared to 2006, this rate has increased. "Democratization of corporate ownership has made great strides in recent years. More than 40% of Finnish households own listed shares or mutual funds. Also unlisted companies can spread their ownership more widely. Share-based incentives and employee ownership are good ways to engage workers by also making them owners," says Knüpfer.

The average owner has 337,000 euros in business wealth whereas the median is significantly lower at 37,000 euros. The vast majority of owners own shares in just one company. Only 1% of owners hold shares in ten or more companies. The average wealth of these serial owners is 7 million euros. "Many of these serial owners are successful entrepreneurs who have invested in other companies as business angels. In addition to their wealth, they have accumulated ownership skills and therefore can have a large impact on the economy," Knüpfer points out. 

Owners are more likely to be male and middle-aged

Men represent 73% of owners and hold 77% of business wealth. Individuals aged 40–64 years are the most common age group among owners. They represent 31% of the population, but 60% of owners and 64% of business wealth. People aged 65 and over represent 23% of the population, but only 13% of owners and 19% of business wealth. "The scarcity of this age group among owners likely reflects selling or closing the business at retirement and successions in family firms," says Knüpfer.

Geographically, ownership is unevenly distributed. The Åland Islands, the Greater Helsinki Area, Ostrobothnia, and Southwest Finland have more business wealth than their population size would suggest. Among the thirty largest municipalities, Helsinki, Espoo, Joensuu, Nurmijärvi, Vaasa and Salo exceed their population share in terms of business wealth. At the opposite end of the spectrum one finds Kymenlaakso, South Karelia, Central Finland, and North Savo, as well as Kotka, Kouvola, Hämeenlinna, and Vantaa. The average owner is the wealthiest in Helsinki, Joensuu, Vaasa, and Turku.

Business wealth is unevenly distributed among owners 

The top 1% in business wealth includes 1,700 owners who control almost half of total business wealth. This share has remained almost unchanged since 2006. The average wealth of the top 1% is 16 million euros. Men, Swedish speakers, Master's graduates are overrepresented in this group. Three out of four are men, one in seven has Swedish as their native language, and one in three have a Master's degree.

One in twenty owners has at least one million euros in business wealth, compared to only 0.4% having at least 10 million euros. There are 8,500 millionaires in Finland in 2022, compared to only 3,400 in 2006. "It is great that new successful owners have emerged in Finland. This growth reflects an increase in the value of existing companies, the creation of new very successful businesses, and successions in large family businesses," says Knüpfer.

Ownership displays significant turnover

Every year, one in ten owners quit their ownership position. The number of entering owners is slightly higher, which translates into the net number of owners increasing by about 1% each year. In 2022, only one in three of the original owners of 2006 have remained as owners. In the top 1%, this survival rate equals two in three owners. The position of an owner in the distribution of business wealth changes little over time, with the 2006 position strongly predicting that in 2022. 

"Turnover in ownership positions is a natural part of a dynamic market economy. However, high exit rates may reflect some businesses failing prematurely due to insufficient funding or lack of ownership skills. Developing capital markets and improving ownership skills should thus be a government priority. Facilitating smooth transitions of ownership in acquisitions and family successions is also important," says Knüpfer.

 Read the study here