The Price of Corporate Social Responsibility: The Case of Black Economic Empowerment Transactions in South Africa

32 Pages Posted: 23 Feb 2015

See all articles by William E. Jackson

William E. Jackson

Culverhouse College of Business, University of Alabama

Todd Alessandri

Northeastern University - International Business & Strategy

Sylvia Black

North Carolina Agricultural and Technical State University

Date Written: December 2005

Abstract

Since the demise of apartheid in South Africa, corporations have been encouraged to participate in the governmental goal of increasing corporate ownership by the black majority population. One vehicle that has arisen to help facilitate an increase in corporate ownership has been black economic empowerment (BEE) transactions. BEE transactions are essentially private placements of equity. Firms that have taken this socially activist position of selling portions of their equity, usually at a substantial discount, to black empowerment groups have received positive media attention in the name of “good corporate citizenship.”

This study investigates the market performance of these BEE transactions, specifically addressing three questions. The first question is whether BEE transactions create or destroy wealth. To address this question we use an event study methodology to calculate the cumulative abnormal returns (CARs) associated with public announcements of BEE transactions. The second question is whether specific types of BEE transactions did better or worse than others. We address this question by analyzing the cross-sectional variation in the CARs associated with public announcements of BEE transactions. The third question is whether firms that engage in BEE transactions experience negative post-announcement price performance. This last question is motivated by popular press accounts of the exploitation of black empowerment groups by white-owned South African corporations. To address this question, we test whether BEE transactions have benefited white corporate South Africa at the expense of the participating black empowerment groups.

Keywords: black economic empowerment, corporate social responsibility, event studies, South African stock market

JEL Classification: G14, G15, G18, F39

Suggested Citation

Jackson, William E. and Alessandri, Todd and Black, Sylvia, The Price of Corporate Social Responsibility: The Case of Black Economic Empowerment Transactions in South Africa (December 2005). FRB Atlanta Working Paper No. 2005-29, Available at SSRN: https://ssrn.com/abstract=2482419 or http://dx.doi.org/10.2139/ssrn.2482419

William E. Jackson (Contact Author)

Culverhouse College of Business, University of Alabama ( email )

Tuscaloosa, AL 35487-0225
United States
205.348.6217 (Phone)
205.348.6695 (Fax)

Todd Alessandri

Northeastern University - International Business & Strategy ( email )

Boston, MA 02115
United States

Sylvia Black

North Carolina Agricultural and Technical State University ( email )

1601 E. Market Street
Greensboro, NC 27411
United States

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