3. Electronic Theses and Dissertations (ETDs) - All submissions
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Item The taxation of the returns on debt and equity in South Africa(2016-01-29) Wortmann, NeilThe existing South African tax system only acknowledges debt financing through the deduction allowed for interest payments, as compared to equity financing where no such deduction is allowed for dividend payments. Taxpayers are prejudiced should they wish to use equity financing to fund a project or company. The deductibility of interest creates the incentive for taxpayers to use debt funding even when it may not be in the best interests of the company. This paper considers some of the complications of the different tax treatment of the returns on debt and equity. Alternative models including the comprehensive business income tax, an allowance for corporate equity and a deduction for dividends are considered in order to establish whether the taxation of the returns on debt and equity could be improved or simplified in South Africa. Key Words: debt, equity, hybrid instruments, tax deductibility, comprehensive business income tax, allowance for corporate equity, dividend deductibility, South AfricaItem The capital structure variations across industries of listed South African firms during boom and bust cycles(2014-07-10) Nel, MatthewCapital structure is the varying levels of use of debt and equity to finance a firms operations. Firms have an overall leverage level, consisting of a long term and short term level. The economy has different phases over the business cycle ranging from boom cycles where businesses prosper to recessions when they may have difficulties. This cycle can be identified utilising economic indicators, the South African Reserve Bank has classified time periods into growth and recessionary periods, this business cycle phase allocation was utilised for this study to mark recessions. Specific industries from the JSE were selected in an attempt to answer the study’s hypotheses of industry capital structure heterogeneity and that recessions affect capital structure. A sample period from 1995 until 2012 was utilised, containing 5 recessionary years. A stable industry, farming and fisheries, a highly variable industry, the heavy construction industry and a new age industry, the computer services industry, were selected. The results of the study suggested that capital structure varies across industries as evidenced by the mean differences of leverage for total debt, long term debt and short term debt being statistically significant. The computer services industry utilised the least debt over all. The industries all showed a preference for the use of short term debt. Panel data analysis following both Fixed Effect Methodology and Random Effect Methodology was conducted to analyse the firm-specific factors which affect capital structure as well as the use of a dummy variable to capture the effects of recessions. The firm-specific effects under study included asset tangibility, tax, profitability, age and size. South African firms follow a pecking order as shown by the negative relationship observed between profitability and long and short term debt ratios. Existence of weak evidence in this study shows that recessions affect the capital structure of some of the industries studied. The computer services industry is clearly affected, while farming and fisheries industry has very weak evidence that long term debt may be affected, while there is no evidence to show that the heavy construction industry is affected at all. The study concluded with accepting the hypothesis that there are capital structure variations across industries, which are listed on the JSE in boom and bust periods.Item Early warning systems for economic crises in South Africa.(2013-05-15) Ramos, Nicole Diana; ;This paper develops a series of Early Warning System models for debt crises. This paper uses a Debt Pressure index to define crisis periods and then demonstrates how one can go about trying to forecast these periods using Logit and Markov-switching Models. An alternative approach, whereby ordinary least squares (OLS) is used to create Early Warning System models, is introduced. A graphical analysis is also conducted. Three useful Early Warning System models emerge from this study.Item Capital and debt maturity structures of a firm: evidence from selected African countries(2012-07-04) Lemma, Tesfaye TaddeseThe thesis examines the influence of institutional, macroeconomic, industry and firm characteristics on financing decisions of firms in nine select countries in Africa. It develops a battery of econometric models and examines 10 year (1999-2008) data pertaining to 986 non-financial firms and sample countries using various estimation procedures. The results suggest that financing decisions of firms in Africa is not only determined by firm characteristics (such as firm size and profitability, growth opportunities, asset tangibility and/or maturity, earnings volatility, dividend payout and non-debt-related tax-shield) but also by industry, macroeconomic (income group of the country, size of the overall economy and its growth, inflation and taxation) and institutional (legal origin, investor rights protection and law enforcement) factors. The research also demonstrates that firms in Africa face adjustment costs and/or benefits in rebalancing their capital and debt maturity structures to the optimal and such costs depend on select firm, industry, macroeconomic and institutional factors. Our findings signify that firms in Africa are concerned about transaction, agency and bankruptcy costs; information asymmetry and adverse selection problems; financial flexibility and access to finance issues; tax regimes, investor rights protection and law enforceability, among others in making their financing decisions. It is strongly recommended that governments, policy makers, and other stakeholders should pull their efforts together to come up with legislations, policies and directives that enhance investor rights protection and law enforcement which will in turn boost the confidence of market participants. The study also recommends that governments should use interest rate restraints and reserve and liquidity requirements to enhance financial deepening which will in turn enhance investors’ confidence.