Title page for ETD etd-04052011-122127


Document Type Master's Dissertation
Author Esterhuysen, Willem Derek
URN etd-04052011-122127
Document Title Share price reaction to Financial Mail’s “Top Companies” announcements
Degree MBA
Department Gordon Institute of Business Science
Supervisor
Advisor Name Title
Prof M Ward Supervisor
Keywords
  • share price
Date 2011-04-20
Availability unrestricted
Abstract

Responsible Investment considers environmental, social and corporate governance criteria. These criteria, as an investment strategy, aim to have a positive impact on society as well as maximize financial returns. The concept of Responsible Investment is becoming more prominent and important to investors, both internationally and locally, with evidence from the negative reaction of share prices to recent events such as the BP oil spill.

The Johannesburg Stock Exchange, in collaboration with FTSE4Good, has developed Responsible Investment criteria. The aim of the criteria is to ensure global alignment, with regards to environmental criteria, and also ensure local relevance, with criteria that deals with issues such as black economic empowerment, skills development and HIV/Aids.

This research examines the share price behaviour of companies that are recommended by analysts as ‘Top Companies’ on the basis of their compliance to set Responsible Investment criteria, with specific reference to the annual ‘Top 20 Companies’ as recommended by the Financial Mail magazine.

Using event study methodology, the short- and long-term behaviour is studied for the 140 companies mentioned in the list from 2003 up until 2009. Positive, significant abnormal returns of around 2% are observed in the first 10 days following the announcement for the companies mentioned in the list for the first time. No positive abnormal returns are however observed for longer-term holding periods of up to 200 days following the announcement.

The result suggests that the Financial Mail analysts’ annual recommendation is of value only to low transaction cost, short-term traders. Longer-term investors, who buy the recommended shares, generally receive returns similar to the market rate of return.

Copyright © 2010, University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria.

Please cite as follows:

Esterhuysen, WD 2010, Share price reaction to Financial Mail’s “Top Companies” announcements, MBA dissertation, University of Pretoria, Pretoria, viewed yymmdd < http://upetd.up.ac.za/thesis/available/etd-04052011-122127 / >

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