Corporate social responsibility: the financial impact of black economic empowerment transactions in South Africa

Abstract

Corporate social responsibility (CSR) has recently received considerable attention in literature. One of the vehicles by which companies can conform to CSR in South Africa is Black Economic Empowerment (BEE). In this regard, BEE has been employed to assist previously disadvantaged groups of investors obtain a larger share of the equity of South African listed companies. The question has often been asked whether the announcement of BEE transactions by listed companies increases shareholder wealth. This article tries to answer this question by examining the share performance of 125 BEE transactions involving 95 companies during the period January 2002 to July 2006. The results indicate a positive relation between BEE transaction announcements and shareholder wealth creation, but only during the last part of the period covered by the study.

The association among the seven elements of the black economic empowerment score and market performance

“…Previous literature has found a negative association between the BEE score and future share returns in the short term (Ferreira & De Villiers, 2011). However, the ownership element, one of the seven elements, is perceived by the market as positive on the BEE deal announcement date (Alessandri, Black & Jackson, 2011;Jackson, Alessandri & Black, 2005;Strydom, Christison & Matias 2009;Ward & Muller, 2010;Wolmarans & Sartorius, 2009).…”

“…An association study following a multivariate regression based on the Fama and French (1998) model as well as controlling for factors and insights from other similar studies is used in this study (Alessandri, Black & Jackson, 2011;Ferreira & De Villiers, 2011;Jackson, Alessandri & Black, 2005;Strydom, Christison & Matias 2009;Van Heerden, 2011;Ward & Muller, 2010;Wolmarans & Sartorius, 2009). Previous literature has found a negative association between the BEE score and future share returns in the short term (Ferreira & De Villiers, 2011).…”

“…A number of studies have been done on the BEE deal announcement (Alessandri, Black & Jackson, 2011;Jackson, Alessandri & Black, 2005;Strydom, Christison & Matias 2009;Ward & Muller, 2010;Wolmarans & Sartorius, 2009). These studies have shown that the market's perception of the BEE deal announcement, representing the ownership element, is positive.…”

“…BEE deal announcements have a positive effect on companies' share prices in the short term (Alessandri, Black & Jackson, 2011;Jackson, Alessandri & Black, 2005;Strydom, Christison & Matias 2009;Ward & Muller, 2010;Wolmarans & Sartorius, 2009). However, a study done by Ferreira and De Villiers (2011) found a negative association between companies' BEE scores and their share returns in the short term.…”

The strategic implications of black empowerment policy in South Africa: a case study of boundary choice and client preferences in a small services firm

“…Specifically, the post-Apartheid government has introduced a far-reaching black economic empowerment (BEE) policy aimed at increasing black participation in the economy (Black, 2002). Academic literature has studied the impact of BEE policy on mergers and acquisitions as well as investment returns (Jackson, Alessandri & Black, 2005;Strydom, Christison & Matias, 2009;Wolmarans & Sartorius, 2009). By contrast, research on the impact of BEE on strategic decisions and value chain structures is still scarce.…”