Corporate ownership and market valuation in South Africa: uncovering the effects of shareholdings by different groups of corporate insiders and outsiders

Abstract

This paper examines the connection between shareholdings by different groups of corporate officers (insiders and outsiders), and market valuation in South Africa. Specifically, and distinctively, we examine the effect of shareholdings by employees, chief executive officers, chief financial officers, other executive directors, and non-executive (outside) directors on market valuation. Consistent with past evidence, we find that total ownership by all corporate officers (insiders and outsiders) has a positive effect on market valuation. However, when we examine the link between ownership by individual groups of corporate officers (insiders and outsiders) and market valuation, our results suggest that firms with higher ownership by chief executive officers and other executive directors have lower market valuation, but we do not find any evidence that ownership by chief financial officers has any significant effect on market valuation, except when interacted with ownership by CEOs. In contrast, we find that ownership by employees and non-executive (outside) directors has a positive effect on market valuation. The central tenor of our evidence remains largely unchanged across a number of econometric models that sufficiently address different types of endogeneities and market valuation measures. Overall, our findings are generally consistent with the predictions of agency theory.

Keywords: Corporate governance, Market valuation, Corporate officer ownership groups, Agency theory - Convergence-of-interests and entrenchment hypotheses, South Africa, Endogeneity

More information

Identifiers

ORCID for Collins G. Ntim: orcid.org/0000-0002-1042-4056

Catalogue record

Export record

Altmetrics