Browsing by Author "Chipeta, Chimwemwe"

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A comparative analysis of the impact of Covid-19 and the global financial crisis on capital structure: Evidence from the Johannesburg Stock Exchange
(University of the Witwatersrand, Johannesburg, 2023) Mjeso, Thandiwe; Chipeta, Chimwemwe
Since Modigliani and Miller (1958) introduced the modern theory of capital structure, various studies have been conducted on capital structure. This study contributes to the existing capital structure literature by investigating how the Covid-19 pandemic impacted the capital structure of Johannesburg Stock Exchange (JSE) listed non-financial firms and comparing this impact to that of the 2008 global financial crisis. Furthermore, this study seeks to determine the relationship between capital structure and fundamental firm factors (business risk, profitability, firm size, growth, and asset tangibility). To conduct this analysis, the financial data of these firms for the 2005 to 2022 period is extracted from Bloomberg and the Generalized Method of Moments (GMM) model is used to conduct the analysis of this study. The results of this study indicate that Covid-19 did not have a statistically significant impact on the capital structure of the JSE listed non-financial firms whereas, the 2008 global financial crisis had a statistically significant impact. Overall, the results of this study are consistent with the empirical evidence reported by previous studies, and they provide evidence in support of both the trade-off theory and the pecking order theory
Capital Structure and Financial Performance of State-Owned Enterprises in South Africa: Does Corporate Governance matter?
(University of the Witwatersrand, Johannesburg, 2024) Khumalo, Nomathemba; Chipeta, Chimwemwe
The study examines the relationship between capital structure and financial performance of South African State-Owned Enterprises (SOEs) considering corporate governance factors. Using empirical data derived from financial reports and audited statements of 21 major SOEs listed in the Public Finance Management Act (PFMA) of South Africa, this study employs a quantitative methodology, specifically employing Fixed Effect (FE) and Generalized Methods of Moments (GMM) regression models on annual data from 2010 to 2022 to examine variables that affect financial performance of the South African SOEs.The research reveals mixed relationships between capital structure factors and financial performance, yet these relationships lack significance. Similarly, corporate governance demonstrates diverse relationships with financial performance, however, a significant negative correlation exists between board composition and return on assets. When examining the effect of corporate governance on capital structure in influencing financial performance, the study indicates an insignificant impact on financial performance. The policy implications of the study suggest that enhancing corporate governance practices, combating corruption, promoting strategic investments, efficient resource allocation, and government support for SOEs as drivers of economic growth should be guided by a clearly defined funding policy to enhance the financial performance of SOEs.
Determinants of optimal capital structure for non-financial firms listed on the JSE
(University of the Witwatersrand, Johannesburg, 2024) Chipeta, Chimwemwe
This paper investigates the determinants of optimal capital structure while considering the influence of the cost of capital, specifically examining the relationship between firm-specific variables known to drive optimal capital structure (such as firm size, asset tangibility, growth, liquidity, and profitability) and the cost of capital. The analysis of these determinants in developing countries is intriguing due to the differences in firm characteristics compared to those in advanced economies. The study utilizes primary data sourced from Refinitiv Workspace for 189 firms across various sectors listed on the Johannesburg Stock Exchange (JSE) from 2015 to 2023, excluding financial services and insurance sectors. Panel econometric approaches, including Feasible Generalised Least Squares (FGLS) and the Generalised Method of Moments (GMM) regression method, are employed for analysis. The findings of the study unveil several noteworthy relationships between independent variables and the Weighted Average Cost of Capital (WACC). Firm size, profitability, asset tangibility, and growth emerge as key determinants affecting WACC to varying degrees. Firm size and profitability exhibit positive associations with WACC, supported by statistically significant coefficients. This implies that increases in firm size and profitability correspond to higher WACC levels. Conversely, asset tangibility and growth demonstrate negative correlations with WACC, backed by statistically significant coefficients. Furthermore, firm size and profitability maintain their positive relationships with WACC across various estimation models, including Feasible Generalized Least Squares (FGLS) and Generalized Method of Moments (GMM). This consistency underscores the robustness of these relationships, with larger and more profitable firms consistently exhibiting higher WACC.