BENCHMARKING VALUE CREATION OF COMPANIES LISTED ON THE JSE’S ALTX

Year 2016, Volume: 8 Issue: 1, 131 - 144, 01.06.2016

John Beneke

Abstract

The primary objective of most companies in today’s business world is to maximise shareholders’ wealth. Value-based management (VBM) is a management approach that maximises long-term shareholder value using various metrics to determine if wealth was created (or destroyed). Small and medium enterprises (SMEs) are viewed as a means to achieving a dynamic and flourishing private sector as well as to ensure development that is more equitable. This then raises the following questions: can value-based management principles be applied in SMEs to create shareholder wealth; are SMEs able to create value; and, how does SMEs compare when benchmarked against each other? For this study companies listed on the AltX board of the Johannesburg Stock Exchange from 2007 to 2012 was used. Three VBM metrics was used to determine if valued was created or destroyed based on financial performance. Data Envelopment Analysis (DEA), which is a non-parametric linear programming technique, was used as the benchmarking tool. The results indicates that a very limited number of companies were deemed efficient in creating value. It was also established that the financial crisis of 2008 and 2009 had a significant negative impact on the AltX companies

Keywords

Value-based management, data envelopment analysis, small and medium enterprises, value-drivers, economic value added, market value added

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