Electronic Theses and Dissertations (Masters)

Permanent URI for this collectionhttps://hdl.handle.net/10539/37781

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Start date: 2016Subject: search.filters.subject.JSE

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Now showing 1 - 9 of 9
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    Evaluating the relationship between retail and technology companies’ share prices with earnings and net cash flow in the context of South Africa and America (USA)
    (University of the Witwatersrand, Johannesburg, 2023) Tiquin, Cal; Brahmbhatt, Y.
    Background: The informational value of accounting information is becoming increasingly important within the context of the modern information age. Research in this regard is lacking within the South African context, and within the technological sector. Purpose: The purpose of this research study is to test if the explanatory power of net earnings and cash flow differed for separate sectors of stock exchanges. Methodology: Four samples, representing the technology and retail sectors of both the JSE and the NYSE were collected and analysed in terms of an Ohlson (1995) model for a five year time period, from 2017 to 2021 (inclusive). Using a linear panel data regression model with secondary data, the explanatory power of both cash flow and earnings were compared between the different sectors. Findings: The results showed that the explanatory power of cash flow was greater than the explanatory power of net earnings on the NYSE for the technology sector, while the opposite was true for a traditional, retail sector. No significant regression results were attained for the JSE. Implications: The findings of this research provide valuable insight into the informational value of accounting information, and how it may differ between sectors. It may also assist regulatory bodies, Stock exchanges and investors in determining if different accounting information should be presented or prioritised for different sector
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    Investigating the relationship between integrated reporting quality and its effect on risk of the top 100 JSE listed companies in South Africa
    (University of the Witwatersrand, Johannesburg, 2023-12-13) Jhavary, Musnaa; Cerbone, Dannielle
    This thesis investigates the relationship between the quality of an organization’s integrated report, as defined by the EY Integrated Reporting Awards, and the risk of the organisation. To achieve this the relationship between an entity’s financial ratios and the quality of the integrated report it produces are calculated and explored. A quantitative research approach is used and risk is proxied using debt and equity ratios collected from the IRESS database, as well as integrated reports found on the websites of the top 100 JSE-listed companies over five years from 2017 to 2021. A regression is performed using the Statistical Package for the Social Sciences (SPSS) software. The results suggest a significant relationship between the costs of debt and integrated reporting quality, when compared to the cost of equity and the weighted average cost of capital. In addition, other variables hold a stronger relationship with integrated reporting quality, such as the ability of a firm to produce a standalone CSR report, as well as the firm’s equity market-to-book ratio and a firm’s size
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    An evaluation of corporate actions as a shareholder wealth creation mechanism for JSE-listed investment holding companies
    (University of the Witwatersrand, Johannesburg, 2023) Schwenke, Nicholas
    Background: Investment holding companies represent a category of company primarily focused on adding value by increasing the value of the stakes in the businesses they own. In South Africa there is a trend for Investment Holding companies to trade at a price lower than their reported intrinsic net asset value that is widely commented on by management teams and the financial press. It is also accepted that corporate actions are known to have an impact on share price and investor behaviour. Purpose: The purpose of this research is first to quantify the discount to intrinsic net asset value across a sample of holding companies. This research will also determine if corporate actions pursued by holding companies have reduced any discounts which exist and, in the process, created value for shareholders. Finally, an assessment of which corporate actions is most effective in reducing the discount (if any) will be prepared. Method: Discounts are quantified by comparing daily share prices to the reported intrinsic net asset value. The impact of corporate actions is evaluated using an event study methodology using multiple estimation models. Results: The results showed that corporate actions resulted in no significant abnormal returns apart from in a six-month event window after the event announcement date. Statistically significant negative abnormal returns were noted in this event window. This indicates that corporate actions are not an effective way of reducing the discount to intrinsic net asset value. Contribution: This research adds to the existing JSE event study literature by focusing on a specific subset of companies. The research makes a theoretical contribution by suggesting value creation strategies for businesses which may be fundamentally mispriced
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    Is the Environmental, Social and Corporate Governance (ESG) score the missing factor in the Fama-French five factor asset pricing model?
    (2022) Nsibande, Luyanda Malusi Qiniso
    Background: Companies are increasingly encouraged to focus on the creation of sustainable value. In South Africa, financial research institutions evaluate and track companies’ performance based on environmental, social and governance-related criteria. These scores are intended to inform decisions by potential equity investors, amongst others. However, commonly-used asset pricing models do not include ESG scores. Purpose: The purpose of this research is to discover whether the inclusion of Environmental, Social and Governance (ESG) scores in the Fama and French fivefactor model (FF5) will improve the model’s predicting power of expected returns on the Johannesburg stock exchange JSE Methodology: For the largest 40 JSE-listed companies, statistical ordinary least squares (OLS) regression was employed with R statistics to analyse fundamental, share price and ESG score data over the five-year time period from 2015 to 2019. The researcher compared the predictive power of the FF5 model to that of the same model including ESG scores. Findings: The results showed that the predictive power of the FF5 model is only marginally improved when the ESG scores are incorporated. These findings may indicate that equity prices are not significantly influenced by ESG scores. Implications: The findings of this research provide the basis for further endeavours on the share-price implications of ESG performance. It makes a theoretical contribution by suggesting possible enhancements to traditional asset pricing techniques.
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    Financial reporting quality: an exploratory study of small-and mid-cap entities listed on the JSE
    (2021) Brookes, Leigh
    The fundamental challenges small-and mid-cap firms are facing in producing high-quality financial statements: High-quality financial statements are becoming increasingly difficult to prepare as business and the IASB’s standards evolve and become increasingly complex. This may leave small-and mid-cap firms vulnerable to being ill-equipped to produce high-quality financial statements based on their limited resources and dependencies. Minimal research has focused on the components that contribute to attaining high-quality financial statements at small-and mid-cap firms. The research that has focused on this has been predominately centered around large-cap firms, while little attention has been allocated to that of the small-and mid-cap firms. Small-and mid-cap firms comprise the majority (in number) of the companies listed on the JSE and contribute a significant portion of growth and employment to South Africa. It is important to address this gap in research so that structures can potentially be put into place to support these companies and aid their success. An exploratory qualitative research method was employed due to the limited availability of prior research. Data was obtained through semi-structured, open-ended interviews with senior financial executives at small-and mid-cap JSE listed entities. Further interviews were conducted with auditors, regulators, and academics in relation to their interactions and perceptions of the financial reporting quality at small-and mid-cap firms. It appears that small-and mid-cap firms may be disadvantaged by the limited resources they have access to. If so, this tends to adversely affect their ability to implement effective corporate governance and particularly obtain financial management with high expertise, adversely affecting the quality of their financial statements. Conversely, there are factors that may contribute to decreasing the challenges they face. Small-and mid-cap firms often have finance teams with longer tenures and inherently less complex processes and reporting. This allows staff to understand the business intrinsically, facilitating with the financial reporting process
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    The determinants of the voluntary disclosure of Free Cash Flows (FCF) by JSE listed companies
    (2021) Matumba, Charles
    There has been growing interest in Free Cash Flow (FCF) in the areas of finance and accounting as the debate for value relevance continues. FCF in South Africa falls under the category of Alternative Performance Measures (APMs) according to the Johannesburg Stock Exchange (JSE) classifications. FCF disclosure is voluntary in the financial statements/annual reports and this study aims to examine the determinants of that voluntary disclosure over the 5 years 2014-2018 for JSE-listed companies. A quantitative approach using secondary data was followed and 157 JSE listed companies were selected over the 5 years 2014 to 2018. The study investigated nine independent variables and hypotheses. The independent variables were FCF margin, change in Earnings per Share (EPS), Dividends per share(DPS), Capital Intensity (CAPI), Leverage (LEV), Foreign Listing (FORLIST), Sales Growth (SG), Size (SIZE) and age since incorporation (AGE). The categorical dependent variable was Free Cash Flow Voluntary Disclosure (FCFVD), which was coded/categorised as 0, 1 and 2 according to the level of FCF disclosure. The variables of FCF Margin, CAPI, SIZE and FORLIST were found to be significant as the determinants of FCF voluntary disclosure by the South African JSE listed companies. The main findings of the research relating to the wide FCF nomenclature by JSE companies lead to challenges in comparison of FCF information by users of financial statements. The recommendation is for the JSE and the South African Institute of Chartered Accountants (SAICA), in collaboration with industry bodies and other key stakeholders, to develop a framework for the definition and calculation of the top five FCF names/measures. Other proposed areas of further research are FCF managerial manipulation of compensation schemes/metrics and share price performance, further sectorial FCF disclosure trends/analysis, extending the study for a longer period and to include the financial and real estate sectors. This study contributes to the FCF voluntary disclosure body of international literature and initiates this area of research in South Africa. The study is of significance as bridging the gap and broadening the understanding of FCF disclosure in South Africa. The aim of this research is to assist companies in their FCF voluntary disclosure practices and at the same time, to assist regulators in considering the need to regulate the reporting practices of the FCF, in particular, when the JSE finalises its regulatory criteria for the reporting of APMs to listed companies
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    Capital market reaction to changes in the Minister of Finance in South Africa
    (2020) Tshikovhela, Azwianzi
    The efficient market hypothesis (EMH) has been a key topic of Finance in developing and developed countries. This study will focus on the application of the EMH on a particular political event in South Africa as developing country. The study investigates the reaction of the Johannesburg Stock Exchange (JSE) equity market returns and JSE government bonds’ yield returns due to changes in the National Minister of Finance in South Africa. Several theories were applied to provide perspective on the issue of information flow and market returns volatility. The study adopted the event study methodology to analyse the effect on changes in the Minister of Finance on the JSE capital market and abnormal returns were calculated using the market model approach, with an event window period of 21 trading days and an estimation period of 252 trading days. The study was focused on a period of 10 years, from 2009 until 2018, which is a period after the apartheid era. The research analysed a sample of the Top 100 JSE listed firms in 2018 and all the government bonds listed on the JSE that were trading during the period of this study. The overall results show that JSE equity market returns and JSE government bonds’ yield returns react insignificantly negatively or positively depending on the timing and circumstances surrounding the change in the National Minister of Finance. These findings have important implications for the optimal strategies of risk-averse capital market investors
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    Market reactions to financial and resources BEE deals on the JSE
    (2019) Hertz, Jenna
    In South Africa, Black Economic Empowerment (BEE) has been instrumental in the transformation of the country post-Apartheid. The involvement of key sectors in transformation is dependent on specific Industry Charters and the impact of these charters on the implementation of BEE by companies has been largely ignored by prior literature. This research examines the short-run impact of BEE equity/ownership deals on the share price performance of JSE-listed stock by calculating abnormal returns (ARs) and cumulative abnormal returns (CARs) subsequent to announcements in the resource and financial sectors. The objective of the study is to determine whether announcements of BEE deals resulted in the creation of shareholder wealth in these specific sectors. The study further explores whether size of the issuing company was a factor in how the markets received BEE deal announcements. The research employed a standard event study methodology which is widely used in finance literature to examine the impact of corporate events on shareholder wealth. The sample included 111 BEE deal announcements by resource sector companies during the period January 2003 until October 2018 and 75 BEE deal announcements by financial companies during the period January 2004 until October 2018. ARs and CARs were analysed over an 11 day event window. The results of the study found that qualifying announcements had a significant positive impact on the CARs of financial sector companies and an insignificant negative impact on the CARs of resource companies over the 11 day event window. This demonstrated that BEE deals were perceived to destroy value in the resource sector and create value in the financial sector for shareholders. The difference in reaction between the two sectors was found to be significant. Furthermore, the research findings indicated that the market reacted more favourably to BEE deal announcements made by ‘small’ companies regardless of the sector. However, while these findings were significant for the financial sector, they were proven to be insignificant for the resource sector.
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    Market reaction to the FTSE/JSE responsible investment index series
    (2019) Usher, Hayden Philip
    Responsible investment has seen considerable growth since the turn of the millennium, and this has spurred the creation and continuous development of responsible investment indexes across the globe. The purpose of this paper is to investigate whether the release of the RI index series contains price sensitive information content and therefore has value relevance for the market. Using event study methodology applied to the six releases of the FTSE/JSE Responsible Investment Index series from October 2015 to June 2018, this paper investigates the impact on the share prices of constituent, included and excluded firms from this index series. The study finds that the release of the constituents of the RI index does not contain new information content while constituents of the RI top 30 experience positive and statistically significant abnormal returns as a result of their constituency. The inclusion of firms on the RI index is not a release of new price-sensitive information, while firms included on the RI top 30 experience a sustained increase in share price throughout the event window. Firms excluded from the RI index and RI top 30 experience negative and statistically significant share returns and the market applies a greater discount toward firms excluded from the RI top 30. Finally, there are statistically significant differences between firms that were included and firms that were excluded from the RI index and the RI top 30 post-announcement date, and this is caused by the market applying a value discount toward firms with deteriorating ESG performance and disclosure. From an investors perspective, investors are able to generate significant arbitrage returns by shorting (longing) shares of firms expected to be to be excluded (included) from the RI index series. Consequently, firms should strive to be included or remain on the RI index series in order to signal the market that there has not been a deterioration in their ESG performance and disclosure, which would have a negative impact on their share price.