Ntim, collins g and Opong, kwaku k and Danbolt, jo (2010): Corporate governance, affirmative action and firm value: evidence from post-apartheid South African firms.
This is the latest version of this item.
Download (351Kb) | Preview
Research Question/Issue: The post-Apartheid South African (SA) corporate governance (CG) model is a unique hybridisation of the traditional Anglo-American and Continental European-Asian CG models, distinctively requiring firms to explicitly comply with a number of affirmative action and stakeholder CG provisions, such as black empowerment and HIV/Aids. This paper examines the association between a broad CG index and firm value in this distinct corporate setting. Research Findings/Insights: Using a sample of 169 post-Apartheid SA firms from 2002 to 2007, we find a significant positive association between a broad CG index and firm value, as proxied by Tobin’s Q. Distinct from prior studies, but consistent with political cost, legitimacy and resource dependence theories, we find that compliance with affirmative action CG provisions impacts positively on firm value. The results are robust across a number of econometric models that control for different types of endogeneity, accounting and market-based firm valuation measures. Theoretical/Academic Implications: The paper contributes to the literature on the association between compliance with codes of good governance and firm value by specifically modelling the relationship within a unique institutional, legal and CG environment. Distinctively, we contribute to the literature by showing how affirmative action and stakeholder CG provisions impact on firm value. Practical/Policy Implications: The results have important policy implications for companies and regulators. They suggest that investors reward firms with better CG practices with higher market valuation, providing support to the efforts by various stakeholders at improving CG standards in SA companies. The results also suggest that SA companies who pay serious attention to complying with affirmative action and stakeholder CG provisions may reap benefits in the form of higher firm value.
|Item Type:||MPRA Paper|
|Original Title:||Corporate governance, affirmative action and firm value: evidence from post-apartheid South African firms|
|English Title:||Corporate governance, affirmative action and firm value: evidence from post-apartheid South African firms|
|Keywords:||Corporate governance, affirmative action, firm value, South Africa, endogeneity|
|Subjects:||G - Financial Economics > G3 - Corporate Finance and Governance > G38 - Government Policy and Regulation
G - Financial Economics > G3 - Corporate Finance and Governance > G34 - Mergers; Acquisitions; Restructuring; Corporate Governance
G - Financial Economics > G3 - Corporate Finance and Governance > G30 - General
|Depositing User:||collins g Ntim|
|Date Deposited:||18. Jul 2011 12:38|
|Last Modified:||17. Feb 2013 18:46|
Agrawal, A. & Knoeber, C. R. 1996. Firm performance and mechanisms to control agency problems between managers and shareholders. Journal of Financial & Quantitative Analysis, 31: 377-389.
Aguilera, R. V. & Cuervo-Cazurra, A. 2009. Codes of good governance. Corporate Governance: An International Review, 17: 376-387.
Andreasson, S. 2010. Understanding corporate governance reforms in South Africa: Anglo-American divergernce, the King reports and hybridization. Business & Society, forthcoming.
Barr, G., Gerson, J., & Kanto, B. 1995. Shareholders as agents and principals: the case for South Africa’s corporate governance system. Journal of Applied Corporate Finance, 8: 18-31.
Baur, R. Gunster, N., & Otten, R. 2004. Empirical evidence on corporate governance in Europe: The effect on stock returns, firm value, and performance. Journal of Asset Management, 5: 91-104.
Beattie, V., McInnes, B., & Fearnley, S. 2004. A methodology for analysing and evaluating narratives in annual reports: a comprehensive descriptive profile and metrics for disclosure quality attributes. Accounting Forum, 28: 205-236.
Bebchuk, L., Cohen, A., & Ferrell, A. 2009. What matters in corporate governance?, Review of Financial Studies, 22: 783-827.
Beiner, S., Drobetz, W., Schmid, M. M., & Zimmermann, H. 2006. An integrated framework of corporate governance and firm valuation. European Financial Management, 12: 249-283.
Bevan, A. A. & Danbolt, J. 2004. Testing for inconsistencies in the estimation of UK capital structure determinants. Applied Financial Economic, 14: 55-66.
Bhagat, S. & Bolton, B. 2008. Corporate governance and firm performance. Journal of Corporate Finance, 14: 257-273.
Black, B. S. 2001. The corporate governance behaviour and market value of Russian firms. Emerging Markets Review, 2: 89-108.
Black, B. S. & Khanna, V. S. 2007. Can corporate governance reforms increase firms’ market values? Event study evidence from India. Journal of Empirical Legal Studies, 4: 749-796.
Black, B. S., Jang, H., & Kim, W. 2006. Does corporate governance predict firm’s market values? Evidence from Korea. Journal of Law, Economics & Organization, 22: 366-413.
Chen, W.-P., Chung, H., Hsu, T.-L., & Wu, S. 2010. External financing needs, corporate governance, and firm value. Corporate Governance: An International Review, 18: 234-249.
Chung, K. H. & Pruitt, S. W. 1994. A simple approximation of Tobin’s Q. Financial Management, 23: 70-74.
Credit Lyonnais Securities Asia (CLSA) 2000. The Tide’s Gone Out: Who’s Swimming Naked?, Credit Lyonnais Securities Asia, Hong Kong.
Core, J. E., Guay, W. R., & Rusticus, T. O. 2006. Does weak governance cause weak stock returns? An examination of firm operating performance and analysts’ expectations. Journal of Finance, 61: 655-687.
Cremers, K. J. M. & Nair, V. B. 2005. Governance mechanisms and equity prices. Journal of Finance, 60: 2859-2894.
DeAngelo, L. E. 1981. Auditor size and auditor quality. Journal of Accounting and Economics, 3: 181-199.
Drobetz, W., Schillhofer, A., & Zimmermann, H. 2004. Corporate governance and expected stock returns: evidence from Germany’, European Financial Management, 10: 267-293.
Durnev, A. & Kim, E. H. 2005. To steal or not to steal: firm attributes, legal environment, and valuation. Journal of Finance, 60: 1461-1493.
Garay, U. & González, M. 2008. Corporate governance and firm value: the case of Venezuela. Corporate Governance: An International Review, 16: 194-209.
Gompers, P., Ishii, J. & Metrick, A. 2003. Corporate governance and equity prices. Quarterly Journal of Economics, 118: 107-155.
Guest, P. M. 2009. The impact of board size on firm performance: evidence from the UK. European Journal of Finance, 15: 385-404.
Gujarati, D. N. 2003. Basic econometrics. New York: McGraw-Hill.
Haniffa, R. & Hudaib, M. 2006. Corporate governance structure and performance of Malaysian listed companies’, Journal of Business, Finance & Accounting, 33: 1034-1062.
Henry, D. 2008. Corporate governance structure and the valuation of Australian firms: is there value in ticking the boxes. Journal of Business Finance & Accounting, 35: 912-942.
Khanchel El Mehdi, I. 2007. Empirical evidence on corporate governance and corporate performance in Tunisia. Corporate Governance: An International Review, 15: 1429-1441.
King Committee. 1994 & 2002. King reports on corporate governance for South Africa. Johannesburg: Institute of Directors.
Jensen, M. C. 1986. Agency costs of free cash flow, corporate finance, and takeovers. American Economic Review, 76: 323-329.
Jensen, M. C. & Meckling, W. H. 1976. Theory of the firm: managerial behaviour, agency costs and ownership structure. Journal of Financial Economics, 3: 305-360.
Kakabadse, A. & Korac-Kakabadse, N. 2002. Corporate governance in South Africa: evaluating the King II report. Journal of Change Management, 2: 305-317.
Klapper, L. F. & Love, I. 2004. Corporate governance, investor protection, and performance in emerging markets. Journal of Corporate Finance, 10: 703-728.
Larcker, D. F. & Rusticus, T. O. 2010. On the use of instrumental variables in accounting research. Journal of Accounting and Economics, 49: 186-205.
London Stock Exchange (LSE) 2007. Corporate governance update – CSR reporting is “excessive burden”. Corporate Governance: An International Review, 15: 96-100.
Malherbe, S. & Segal, N. 2003. South Africa: After Apartheid. In C. P. Oman (Eds.), Corporate governance in development, the experiences of Brazil, Chile, India, and South Africa: 247-251. Washington, OECD.
Mangena, M. & Chamisa, E. 2008. Corporate governance and incidences of listings suspension by the JSE Securities Exchange of South Africa: an empirical analysis. International Journal of Accounting, 43: 28-44.
Morey, M., Gottesman, A., Baker, E. & Godridge, B. 2009. Does better corporate governance result in higher valuations in emerging markets? Another examination using a new data set. Journal of Banking and Finance, 33, 254-262.
Ntim, C. G. 2009. Internal corporate governance and firm financial performance: evidence from South African listed firms. Unpublished doctoral thesis, Glasgow: University of Glasgow.
Petersen, M. A. 2009. Estimating standard errors in finance panel data sets: Comparing approaches. Review of Financial Studies, 22: 435-480.
Renders, A., Gaeremynck, A., & Sercu, P. 2010. Corporate-governance ratings and company performance: A cross-European study. Corporate Governance: An International Review, 18: 87-106.
Available Versions of this Item
- Corporate governance, affirmative action and firm value: evidence from post-apartheid South African firms. (deposited 18. Jul 2011 12:38) [Currently Displayed]