Factors affecting BEE deal value creation for empowerment companies

This study analyses whether certain financial variables (i.e. earnings per share, dividends per share, return on equity, price/earnings ratios, debt/equity ratios, liquidity ratios, lending interest rates and inflation) affect value creation for shareholders in respect of empowerment transactions. The ordinary least squares regression method is used on panel data relating to 32 empowerment companies listed on the Johannesburg Stock Exchange and the fixed effects panel data model is utilized to make the analysis. This study showed a strong correlation between leverage ratios and share prices of empowerment companies. This supports the view that there is a relationship between the extent of debt that an empowerment company takes and the share price movement. The study also shows that dividend per share, earnings per share and price to earnings ratio are significantly correlated with the share prices. The findings from this study could be used in future deal structuring decisions in order to improve value creation for shareholders.