Influence of the performance of Black Economic Empowerment shares on the Johannesburg Stock Exchange Top 40.
Loading...
Date
2020
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
Abstract
The study investigated the performance of Black Economic Empowerment (BEE) shares on
the Johannesburg Stock Exchange (JSE). It employed data from 48 firms active on the JSE
from 2003 to 2016. Unbalanced panel data was used as there were firms with no data for this
period and they were omitted from the study when they were no longer part of the JSE Top 40.
The fixed effects model results showed that BEE shares’ influence on share returns is
insignificant, but that they do have an impact on firm value. It was found that when a BEE
share is issued, the firm’s value increases by 0.522 when return on equity (ROE) is used and
0.45 when return on assets (ROA) is employed. A bootstrap technique was run on the fixed
effects model in order to account for cross-sectional dependency. The bootstrap did not affect
the outcome of the effect of BEE shares on share returns. However, the influence of BEE shares
on the firm’s value became significant. These results are consistent with the existing literature
which states that firms issue BEE shares in order to reap other benefits. Although BEE shares
have no influence on share returns and firm value, it is recommended that firms continue to
issue such shares in order to receive a higher BEE rating.
Description
Masters Degree. University of KwaZulu-Natal, Durban.