Black economic empowerment, legitimacy and the value added statement: evidence from post-apartheid South Africa

Steven F. Cahan and Chris J. van Staden

Accounting and Finance, 2009, vol. 49, issue 1, pages 37-58

Abstract: We examine why companies in South Africa voluntarily provide a value added statement (VAS). The VAS can be used by management to communicate with employees and thereby establish a record of legitimacy. Since we want to establish if the VAS is used to establish symbolic or substantive legitimacy, we examine whether production of a VAS is associated with actual performance in labour-related areas. To measure labour-related performance, we use an independent Black Economic Empowerment (BEE) rating. We find that BEE performance is significantly and positively related to the voluntary publication of a VAS. Our results suggest that BEE performance and disclosure of a VAS are two elements of a strategy used by South African companies to establish their substantive legitimacy with labour. Copyright (c) The Authors. Journal compilation (c) 2009 AFAANZ.

Date: 2009

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