Black Economic Empowerment Contracts and Risk Incentives
52 Pages Posted: 11 Dec 2018
Date Written: November 19, 2018
After the fall of apartheid in South Africa, Black Economic Empowerment emerged as the central policy aimed at redressing the imbalances of the past by fairly transferring financial and economic resources to the majority of its citizens. We develop a dynamic model of the firm in an environment where regulatory constraints are imposed on firms to incentivize them to draw in impoverished citizens, who, without subsidies, could not otherwise join the shareholder base. We explore these schemes and focus on how they affect risk-taking within the firm.
Keywords: Government Policy and Regulation, Ownership Structure, Capital Structure, Risk-Taking
JEL Classification: G320, G380, L51
Suggested Citation: Suggested Citation