3. Electronic Theses and Dissertations (ETDs) - All submissions
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Item Share issues and repurchases related to equity market timing on the JSE(2016-01-29) Potgieter, FahmidaInformation asymmetry creates a gap between management’s perception of the firm’s value and the market value of the firm. It is thought that management engage in information signalling activities in order to close the gap created by information asymmetry. There is a need to understand why management engage in their chosen transactions as this will provide investors with insight into market activities, as well as allow for more accurate investment strategies. While research is available on the market’s reactions to signalling events, the problem is whether management’s intentions have been correctly interpreted by the market. The starting point to gaining this understanding is to ask the question: What signals do management send when they issue and repurchase shares? This study attempts to answer this question by investigating whether companies listed on the Johannesburg Stock Exchange (JSE) issue shares because management perceive their market values to be overvalued and repurchase shares because their market values are undervalued. For the period 1 January 2003 to 31 December 2012, a total of 295 share issue announcements are considered for 102 companies; and a total of 183 share repurchase announcements are considered for 83 companies. The results of this study reveal that managerial equity market timing may exist in the presence of excess returns, where management are better able to predict returns in advance than the market. However, there is also evidence suggesting share repurchases are made to return excess cash to shareholders and issues and repurchases decisions are linked to capital structure planning. The fact that there are other potential reasons for share issues and repurchases, means that the market must be able to determine what the real intentions of management are when shares are issued and repurchased; and hence determine whether their intentions suggest equity market mispricing.Item An empirical investigation of the conditional risk-return trade-off in South Africa.(2013-03-20) Limberis, AndrewOne of the fundamental tenets of finance is the relationship between risk and return. This research report contributes to the debate by testing the conditional risk-return relationship of shares on the Johannesburg Stock Exchange (JSE) for the period 2001 to 2011. More specifically, the extent to which beta, standard deviation, semi-deviation and value-at-risk (VaR) are individually able to explain total share return, taking into account the conditional framework of up and down markets and sub-periods, is investigated. Portfolios based on these risk measures have been tracked and regressed. The robustness of the relationships are tested by using value and equal weighted portfolios. The study indicates that standard deviation was able to explain the risk-return relationship across all scenarios (overall, up/down markets and sub-periods), while beta proved to be an ineffective measure of risk under all scenarios. The testing of downside risk measures revealed that semi-deviation produced weak results under all scenarios, while value-at-risk proved to be an effective measure of risk both during poor market conditions and on an overall basis.Item An analysis of the response to corporate unbundling announcements on the Johannesburg Stock Exchange(2012-07-05) Jordan, Jared BaymanThis research report examines the effect of the announcement of corporate unbundling by South African corporations listed on the Johannesburg Stock Exchange. This research was carried out in order to update the literature and to analyse whether results confirm the previous research performed by Blount and Davidson (1996) or coincides with international trends, which displayed positive responses to unbundling announcements. The event study methodology was used for analysing the market’s reactions to corporate unbundling announcements. Abnormal returns were calculated using the market model approach with an event window of ten days and an estimation window of 120 days. A sample of 27 corporations were analysed in this research report during the period January 2002 to June 2011. The results indicated strong negative abnormal returns as a result of the corporate unbundling announcements. This finding confirms Blount and Davidson’s (1996) earlier research.Item Reviving Beta? Another look at the cross-section of average share returns on the JSE(2012-07-05) Page, DanielVan Rensburg and Robertson (2003a) stated that the CAPM beta has little or no relationship with returns generated by size and price to earnings sorted portfolios. This study intends to demonstrate that a reformulated CAPM beta, estimated using return on equity as opposed to share returns, unravels the size and value premium. The study proves that the “cash-flow” generated beta partially explains the cross-sectional variation in share returns when measured over the long run, specifically when portfolios are sorted on book to market, however the cash flow beta is less successful when attempting to explain the small size premium. The premise of the study is that the cash flow dynamics of share returns eventually dominate the first and second moments and thus result in cash flow based measures of risk and return that should succeed in explaining the cross-sectional variation in share returns. The study makes use of vector autoregressive models in order to examine the short term effect of structural shocks to the cash flow fundamentals of a stock or portfolio through impulse response functions as well as quantifying a long-term relationship between cash flow fundamentals and share returns using a VECM specification. The study further uses fixed effects, random effects and GMM/dynamic panel data cross-sectional regressions in order to examine the ability of the cash flow beta explaining the value and size premium. The results of the study are mixed. The cash flow beta does well in explaining the returns of portfolios sorted on book to market, but fails to do the same with size sorted portfolios. In the cash flow betas favour, it performs far better than the conventionally measured CAPM beta throughout the study.Item Corporate payout in South Africa: have share repurchases replaced cash dividends?(2012-01-18) Ramorwa, Botsang PhomoloA generous amount of research on payout policies has reported that the trends of payout policies have changed overtime. The common pattern in most of these studies is that fifty years ago cash dividend was the most dominant and favourable form of payout, but this pattern was not maintained and saw some changes in the 1980s. The 1980s was a period where the use of repurchases increased significantly in both the US and the UK and this increment was paired with a declining propensity to pay dividends. It is this observation that impelled researchers to suggest that share repurchases were substitutes for cash dividends as they were being finance with reductions in cash dividends. Share repurchases are a new concept in South Africa compared to other international capital markets. The implementation of the Companies Amendment Act 37 of 1999 has made it possible for companies to carry out open market stock repurchase programmes in South Africa and since then, share repurchases have become an intricate part of payout policy for South African firms. This study tests whether indeed the declining propensity to pay dividends and the increasing propensity to repurchase patternsare observable in South Africa and whether share repurchases are indeed substitutes for cash dividends in today’s markets. This study examines the payout policies of 116 companies listed on the Johannesburg Stock Exchange (JSE henceforth) between 2002 and 2009. Overall, this study finds that the use of share repurchases has increased substantially in South Africa during the sample period. Dividends have also increased significantly and the total payout ratio exhibited an upward trend between 2002 and 2009. This implies that the increase in repurchase activity was not financed by the decrease in dividends, as dividends had also followed an upward trend. There is sufficient evidence that repurchases and dividends are certainly not substitutes in South Africa.In addition to the observation thatdividend and repurchase payout ratios moved in the same direction for most parts of the sample period, a iii positive relationship between the dividend forecasting error and repurchase activity was realized, thus, dividends and repurchases weredeclared complements.