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

Authors: Collins G. Ntim

Addresses: Centre for Research in Accounting, Accountability and Governance, School of Management, University of Southampton, Building 2, Highfield, Southampton, SO17 1BJ, UK

Abstract: This paper examines the connection between shareholdings by different groups of corporate officers (insiders and outsiders) and market valuation in South Africa. Specifically, we examine the effect of shareholdings by employees, chief executive officers (CEOs), chief financial officers (CFOs), other executive directors, and non-executive (outside) directors on market valuation. We find that total ownership by all corporate officers (insiders and outsiders) is positively related to market valuation. However, when we examine the link between ownership by individual groups of corporate officers and market valuation, our results suggest that firms with higher ownership by CEOs and other executive directors have lower market valuation, but we do not find any evidence that ownership by CFOs has any significant effect on market valuation. In contrast, we find that ownership by employees and non-executive outside) directors is positively related to market valuation. 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; entrenchment; South Africa; endogeneity; corporate ownership; shareholdings; corporate insiders; corporate outsiders; CEOs; CFOs; executive directors; non-executive directors.

DOI: 10.1504/IJBGE.2013.057378

International Journal of Business Governance and Ethics, 2013 Vol.8 No.3, pp.242 - 264

Available online: 21 Oct 2013 *

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