Black Economic Empowerment Contracts and Risk Incentives

52 Pages Posted: 11 Dec 2018

See all articles by Thomas McWalter

Thomas McWalter

University of Cape Town (UCT); University of Johannesburg

Peter H. Ritchken

Case Western Reserve University - Department of Banking & Finance

Date Written: November 19, 2018

Abstract

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

McWalter, Thomas and Ritchken, Peter H., Black Economic Empowerment Contracts and Risk Incentives (November 19, 2018). Available at SSRN: https://ssrn.com/abstract=3287384 or http://dx.doi.org/10.2139/ssrn.3287384

Thomas McWalter

University of Cape Town (UCT) ( email )

Private Bag X3
Rondebosch, Western Cape 7701
South Africa

University of Johannesburg ( email )

PO Box 524
Auckland Park
Johannesburg, Gauteng 2006
South Africa

Peter H. Ritchken (Contact Author)

Case Western Reserve University - Department of Banking & Finance ( email )

10900 Euclid Ave.
Cleveland, OH 44106-7235
United States
216-368-3849 (Phone)
216-368-4776 (Fax)

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