The black economic empowerment (BEE) score consists of seven elements, namely ownership,
management control, employment equity, skills development, preferential procurement, enterprise
development and socio-economic development. The purpose of this study is to establish whether an
association exists between an entity’s BEE elements and its share returns in the short term.
Based on prior literature, it appears that the market reacts positively to an announcement of a BEE deal,
although the literature also indicates that an entity’s BEE score, which includes all seven elements of the
BEE score, bears a negative relationship to its share returns. Therefore the association between the various
BEE elements and share returns needs to be investigated. The study uses a multivariate regression
analysis that controls for factors influencing share returns. The study includes the BEE element data as
obtained from the survey of the top empowerment companies carried out by Empowerdex/Financial Mail for
the period 2005 to 2011.
The results of this study indicate that a significant positive association exists between the management
control element of the BEE score and the entity’s share returns. Furthermore, a significant negative
association exists between the ownership and preferential procurement elements of an entity and its share
returns. This study contributes to the literature on BEE in the accounting and finance field in South Africa as
well as enhances the understanding and effect of BEE compliance through implementation of the generic
scorecard as required by the 2007 codes of good practice. The results of this study would be of interest to
government policy analysts, investors and managers.