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ABSTRACT
The objective of this study was to determine shareholder value drivers for South African manufacturing firms listed on the Johannesburg Securities Exchange (JSE)from 2006 to 2010. In order to optimise shareholder value creation, management must be able to recognise value drivers that it can control. A multiple regression analysis was used to identify the value drivers of manufacturing firms in South Africa. The value drivers found to be significant in explaining shareholder value are the cost of goods to sales percentage, the degree of manufacturing leverage, and the capital investment in plant and equipment. Value-based management incorporating these value drivers can guide manufacturing managers toward optimal shareholder value creation.
Keywords: Shareholder Value; Value Drivers; Value-Based Management; Manufacturing
INTRODUCTION
South Africa has undergone a remarkable political transformation in the last 16 years, but on the economic front, however, the country has not fared well. Since 1994, South Africa's per capita GDP has admittedly grown at an average rate of 1 .2% per annum, which is comparable to that of sub-Saharan Africa, but much lower than that of South Africa's biggest competitors - South Asia (3.7%) and East Asia (6.2%). The most worrying aspect of this performance is the South African unemployment rate, which at 26%, or 40% (depending on which definition of unemployment is used), is among the highest in the world (Rodrik, 2008). One of me reasons for this state of affairs may be the high wages demanded by trade unions, but a deeper cause for this situation probably lies in the weakness of export-oriented manufacturing growth in the South African economy.
The manufacturing industry is important because it remains among the top four economic sectors to generate material wealth and create jobs in Soudi Africa (Mammburu, 2011). The manufacturing sector, which is the third largest employer (after financial services and the retail trade), is responsible for an estimated 17% of employment in South Africa (Allix, 201 1). Local manufacturers struggle to compete in the domestic market due to increased competition from cheap imported products, the volatile exchange rate, eroding margins on exports and an overall reduction in competitiveness. In September 2011, a new R20 billion tax incentive to encourage investment in new manufacturing assets and employee training was launched by the government....