FACTORS INFLUENCING

Abstract

Black Economic Empowerment is an important and influential aspect of South Africa’s economy. Firms listed on the Johannesburg Securities Exchange have been engaging in deals aimed at Black Economic Empowerment for a number of years. These deals are typically complex and include many aspects that are of particular interest to the affected shareholders. The recent formalisation of Broad-Based Black Economic Empowerment through legislation and the introduction of sector charters, which embody diverse objectives, have added to the complexity of contemporary deals. This study investigates some of the aspects of these deals that might affect shareholder sentiment about the firms in question and hence those firms’ share prices during the public announcement of deal particulars. The results of this research show a post-announcement negative abnormal return for the total sample of Black Economic Empowerment deal announcements, but this response is shown to be a combination of component responses to specific aspects of the deals studied. The most influential aspects of these deals included: The extent to which the deals are Broad-Based, the possible dilution of shareholders’ equity, the firms’ states of compliance after the deals and the extent to which the firms are dependant on government as a client or for approval.