Board Size, Black Empowerment and Firm Value: Evidence from Post-Apartheid South African Firms

Posted: 15 Jul 2011

See all articles by Collins G. Ntim

Collins G. Ntim

University of Southampton Business School, UK; University of Southampton

Kwaku K. Opong

University of Glasgow - Adam Smith Business School

Jo Danbolt

University of Edinburgh Business School

Date Written: June 12, 2010

Abstract

We investigate the association between board size and firm value for a sample of 169 firms from 2002 to 2007 in post Apartheid South Africa (SA). The post Apartheid SA corporate context is interestingly and uniquely characterised by greater urgency to meet affirmative action provisions, such as black empowerment in board appointments, limited qualified and experienced directors, especially black directors, concentrated ownership, weak enforcement of corporate regulations and greater government ownership. These features make SA corporate boards to play a weaker agency (advisory, monitoring and disciplining) role than Western European and US boards, but a stronger resource (resources, such as business contacts and contracts) dependence role. This suggests that any positive impact of board size on firm value is likely to depend on the effective execution of the resource dependence role than the agency role. Our main conclusion is that board size has a positive association with firm value, as proxied by Tobin’s Q. The findings are robust across a raft of econometric models that control for different types of endogeneity, including simultaneity and firm-level fixed effects, as well as different types of accounting and market-based firm valuation measures. Our findings suggest that the boards of the sampled firms perform the resource dependence role better than the agency role.

Keywords: Corporate Governance, Board Size, Firm Value, Black Empowerment And Affirmative Action, King II And South Africa, Endogeneity

JEL Classification: G12, G34, G38

Suggested Citation

Ntim, Collins G. and Opong, Kwaku K. and Danbolt, Jo, Board Size, Black Empowerment and Firm Value: Evidence from Post-Apartheid South African Firms (June 12, 2010). Available at SSRN: https://ssrn.com/abstract=1884299

Collins G. Ntim (Contact Author)

University of Southampton Business School, UK ( email )

Southampton Business School
Highfield
Southampton, England SO17 IBJ
United Kingdom
+44 (0) 238059 4285 (Phone)
+44 (0) 238059 3844 (Fax)

HOME PAGE: http://www.southampton.ac.uk/business-school/about/staff/cgn1n11.page

University of Southampton ( email )

Southampton, SO17 1BJ
United Kingdom

Kwaku K. Opong

University of Glasgow - Adam Smith Business School ( email )

University Avenue
Gilbert Scott Building
Glasgow, Scotland G12 8QQ
United Kingdom

Jo Danbolt

University of Edinburgh Business School ( email )

University of Edinburgh
29 Buccleuch Place
Edinburgh, Scotland EH8 9JS
UNITED KINGDOM

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