Black Economic Empowerment has been one of the South African government's primary mechanisms for addressing the economic imbalances of the apartheid era. Voluntary sector "charters", and more recently legislation, have required largely white owned business enterprises to become more inclusive across key areas of economic empowerment, including the provision of minimum levels of ownership for black shareholders. This research employs event study methodology to examine the long-term impact on the share prices of listed companies after announcements are made relating to black empowerment deals which impact equity ownership. The research examines 118 announcements and finds a positive cumulative abnormal return of around 10% after the first year. The positive result is confined to smaller companies, with market capitalisation of less than R3,5bn, whilst large companies experience a marginally negative cumulative abnormal return. The results also show that those companies which made BEE announcements prior to May 2005 ('first-movers') did somewhat worse than those who followed. Finally, the results were found to be consistent for companies making further BEE related announcements, although the cumulative abnormal returns were lower at around 6%.

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Fama's (1970) efficient market hypothesis (EMH) and the capital asset pricing model (CAPM), jointly ascribed to Markowitz (1952), Treynor (1961), Sharpe (1964), Lintner (1965) and Moss in (1966, remain the foundation of most finance and investment courses. This is surprising, given the sustained criticism of the model and its assumptions, and is a reflection of the elegance and parsimony of the theory over the empirical evidence.On the Johannesburg Stock Exchange (JSE), several authors have examined and noted significant inadequacies relating to the single factor CAPM, particularly with regard to the dual nature (resources versus industrial shares) which characterise this bourse. Van Rensburg and Slaney (1997) advocate the use of a two factor arbitrage pricing theory (APT) model, but show that (at least for industrial shares), additional parameters are required (Van Rensburg, 2001 ).We revisit this ground using an improved methodology and data set over the period 31 December 1986 to 31 December 2011. We find that portfolios constructed on the basis of ranked beta exhibit a monotonic, inverse relationship to what the CAPM prescribes for most of the time-series. The use of the single beta CAPM is therefore inappropriate.

Fama and French (1992), in a controversial paper at the time, noted strong associations between cross-sectional equity returns and so-called style variables including size, the price to earnings (P/E) ratio, gearing and the book to market (B/M) ratio. Other researchers have subsequently identified further priced effects relating to (inter-alia): dividends, momentum, cash-flow and a January effect. Many of these have been identified on the Johannesburg Stock Exchange ( We re-examine many of these styles using an improved methodology and data set. We find that portfolios constructed on the basis of univariate ranked style characteristics exhibit significant effects over the period 1985 to 2011. Most notably, we find significant and persistent excess returns in the following variables: momentum, earnings yield, dividend yield, price to book, cash-flow to price, liquidity, return on capital, return on equity and interest cover. Furthermore, we find no evidence of a size effect, except for fledgling companies.1.

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Firms that invest into positive net present value projects should outperform firms that do not invest. Surprisingly, several studies on United States data have found a negative relationship between capital investment and subsequent shareholder return. There are conflicting explanations for this negative relationship. The present study also confirmed a significant negative relationship between capital investment and subsequent shareholder returns in the South African developing market conditions. Over the period from 1992 to 2017, shares on the Johannesburg Stock Exchange with lower investment rates consistently outperformed shares with higher investment rates, exhibiting similar behaviour to the US. We find that the negative investment return is significantly associated to the firm's book-to-market value consistent to the rationalbased q-theory of investment with real options explanation. have found that there is a strong negative relationship between investment by a firm ('capital investment' or 'I' or 'capex') and subsequent shareholder return ('share return' or 'R') on United States of America ('United States' or 'US') data. These studies have found that firms that make large investments experience subsequent share returns which are abnormally low, whereas firms with low investment rates experience subsequent share returns which are abnormally high.These studies have offered contrasting and competing explanations for this negative relationship puzzle. This area of research is still underdeveloped, and there are a number of debates with regards to the nature and direction of the relationship, and with regards to the effect of time, type of investment and financing structures on the relationship. Kumar and Li (2016) propose that the negative investment return relation is a short-term effect, that the negative relationship holds for mature industries, and that investment in 'innovative capacity' could make the I-R relationship positive. Kumar and Li (2016) also propose that firms with higher investment levels are associated with higher gearing, shifting risk to lenders.An analysis of this kind has not been previously done in a developing market such as South Africa, due to the costs and limitations of obtaining suitable data. However, we have a comprehensive database of company financial statements and JSE share prices over the period 1988 to 2017, with buy-and-hold portfolio research software that makes this research possible. The present study therefore sought to determine the existence of the negative I-R relationship in this context. Literature reviewThe major disagreement amongst previous studies relates to whether the negative relationship is the result of a rational-based explanation based on the q-theory of investment with real options, or whether it is due to a behaviour-based explanation related to manager hubris, overinvestment and mispricing premised on the limits to arbitrage theory. Rational-based explanation (q-theory of investment with real options)The traditional q-theory was initially formulated...

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