n African Finance Journal - The impact of Black Economic Empowerment transactions on shareholder wealth and firm profitability : evidence from the JSE
|Article Title||The impact of Black Economic Empowerment transactions on shareholder wealth and firm profitability : evidence from the JSE|
|© Publisher:||AfricaGrowth Institute|
|Journal||African Finance Journal|
|Author||Chimwemwe Chipeta and Thando Chuma Zukisani Vokwana|
|Publication Date||Jan 2011|
|Pages||71 - 91|
|Issue||Special issue 1|
|Keyword(s)||Average Abnormal Returns (AARs), Black Economic Empowerment, Broad-Based Black Economic Empowerment, Cumulative Average Abnormal Returns (CAARs), G14, Rand Merchant Bank and University of the Witwatersrand|
This study assesses the impact of Black Economic Empowerment announcements on short-term shareholder wealth and firm profitability on JSE listed firms. We find evidence that information about transactions is incorporated into the share price 20 days prior to the announcement day. However, cumulative abnormal returns for the entire period remain negative, indicating negative shareholder wealth effects. Surprisingly, investors tend to react more negatively to transaction announcements during bull market conditions, with daily average abnormal returns of -3.4%. We also document evidence that the listing age of a firm, the firm's growth prospects and overall market conditions are major determinants of short-term profitability.
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