Original Research

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

Cara Maria van der Merwe, Petri Ferreira
South African Journal of Economic and Management Sciences | Vol 17, No 5 | a627 | DOI: https://doi.org/10.4102/sajems.v17i5.627 | © 2014 Cara Maria van der Merwe, Petri Ferreira | This work is licensed under CC Attribution 4.0
Submitted: 22 May 2013 | Published: 28 November 2014

About the author(s)

Cara Maria van der Merwe, Student of the University of Pretoria, South Africa
Petri Ferreira, University of Pretoria, South Africa

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The black economic empowerment (BEE) score consists of seven elements, namely ownership,management control, employment equity, skills development, preferential procurement, enterprisedevelopment and socio-economic development. The purpose of this study is to establish whether anassociation exists between an entity’s BEE elements and its share returns in the short term.Based on prior literature, it appears that the market reacts positively to an announcement of a BEE deal,although the literature also indicates that an entity’s BEE score, which includes all seven elements of theBEE score, bears a negative relationship to its share returns. Therefore the association between the variousBEE elements and share returns needs to be investigated. The study uses a multivariate regressionanalysis that controls for factors influencing share returns. The study includes the BEE element data asobtained from the survey of the top empowerment companies carried out by Empowerdex/Financial Mail forthe period 2005 to 2011.The results of this study indicate that a significant positive association exists between the managementcontrol element of the BEE score and the entity’s share returns. Furthermore, a significant negativeassociation exists between the ownership and preferential procurement elements of an entity and its sharereturns. This study contributes to the literature on BEE in the accounting and finance field in South Africa aswell as enhances the understanding and effect of BEE compliance through implementation of the genericscorecard as required by the 2007 codes of good practice. The results of this study would be of interest togovernment policy analysts, investors and managers.


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doi: 10.21511/ppm.17(1).2019.31