The impact of black economic empowerment transaction announcements on share price performance of JSE listed mining companies

Abstract

Dissertation (MBA)--University of Pretoria, 2014.

The South African government introduced the Black Economic Empowerment (BEE) as
 an intervention to resolve economic imbalances. In furthering inclusivity in the
 previously exclusive sectors, like Mining, the BEE legislations and Mining Charter were
 introduced to benefit the HDSA. The study addressed a significant gap in BEE
 research, which is important within the South African context, as the country currently
 reviews progress after the initial 20 years of democratic dispensation.
 The research examined the share price performance of mining stocks listed on the JSE
 by tracking their share price performance after announcements relating to black
 empowerment transactions. The objectives of the research were to, first, determine
 whether announcements of BEE transactions lead to better shareholder wealth
 creation in the South African mining sector, second, to determine the impact of these
 announcements on Old and BEE mining companies that were listed on the JSE post-
 1994, third, to determine whether the early BEE announcements made before the
 release of the Mining Charter in September 2010 had a greater positive impact on the
 Cumulative Abnormal Returns (CARs) of Mining companies compared to those made
 after the amendment to legislation.
 The research employed an event study methodology to analyse a sample of 26 mining
 companies that made a total of 241 qualifying announcements from January 2000 to
 November 2014.
 The results of the study showed negative impact on the CARs of the mining
 companies. It was noted that the old mining companies that existed before 1994 had
 better average abnormal return than the BEE companies. Further, the results showed
 that the Average Abnormal Returns (AARs) of the BEE announcements made prior to
 the Mining Charter had greater AARs than those made after the implementation. In
 sum, the BEE announcements had largely a negative impact on share performance of
 the mining companies.

lmgibs2015

Gordon Institute for Business Sciences (GIBS)

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