The effect of the Public Investment Corporation's shareholder activism on firm performance in South Africa
Date
2011-06-24
Authors
Xaba, Simon Molefi
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Abstract
The purpose of this study is to evaluate and analyse the effect of Public
Investment Corporation’s (PIC) shareholder activism on firm performance in South
Africa. This includes evaluating and assessing the effect of PIC’s corporate
governance recommendations on firm performance and thus evaluating the effect
of their shareholder activism.
The desktop study of annual reports for the period 2004 and 2007 of the top 36
listed companies in which PIC has shareholding was undertaken. The five point
scale was used to score the performance of each company on the following five
key elements of good corporate governance: Board Commitment, Good Board
Practices, Effective Controls, Transparent Disclosure and Protection of minority
shareholder rights. The corporate governance scorecards and Tobin’s Q were
developed for these 36 companies.
The questionnaires were also developed for the leadership of Institute of Directors
of Southern Africa (IoD) and PIC. The results were statistically analysed using
Descriptive Statistics, Categorical Regression Analysis, Factor Analysis and
Reliability Analysis.
The study has revealed that good corporate governance does not necessarily
translate to good firm performance. This is demonstrated by negative correlation
between Tobin’s Q and the corporate governance scorecards based on PIC
recommendations.
There is insufficient information in South Africa to demonstrate the effect of
shareholder activism on firm performance. The role of shareholder activism gets
clouded with that of transformation activism
Description
MBA - WBS
Keywords
Shareholder activism, Public Investment Corporation