3. Electronic Theses and Dissertations (ETDs) - All submissions
Permanent URI for this communityhttps://wiredspace.wits.ac.za/handle/10539/45
Browse
9 results
Search Results
Item Long run performance of IPO'S on the JSE: taking it to 10 years(2018) Agostinetto, LucianoThis paper investigates the long run performance of 270 South African IPOs during the period 1996 to 2016. Significant under-pricing in the short term and underperformance in the long term is found for equally-weighted event time CARs and buy-and-hold returns using two market benchmarks. This study took the long-term period past five years all the way to ten years to investigate if long-run underperformance persists in South African IPOs. It is found that underperformance persists in IPOs that list on the JSE and this underperformance can be explained by the window of opportunity hypothesis.Item Essays on the relationship between financial sector development and economic growth(2018) Oro, Oro UfuoThis study investigates how financial sector development affects economic growth. The determinants of growth which include financial development have been a subject of academic investigation for the last three centuries. In all these efforts, it has been difficult for researchers to be definitive on the forces that affect growth and to explain the differences in the level of growth among nations. The neoclassical link growth to capital accumulation(CA) and total factor productivity(TFP). More recently, researchers report that financial sector development could result in capital accumulation, innovation, and total factor productivity. We investigate these claims and the various ramification of financial development and how they explain growth and the differences in the rates of growth in different contexts. For example, in chapter two of our thesis, we examine the nature of the finance-growth and finance-growth volatility functions in the context of Nigeria using time series data. To analyze the data, we use semi-parametric, Hansen sample splitting and threshold estimators. Our results are revealing. Contrary to the recent literature, we have no evidence of “to much finance.” We had evidence of U-shaped functions in both the finance – growth, and finance – growth volatility relationships. We discuss policy implications of our findings and make recommendations for reforms based on our results. In chapter three of our thesis, we follow up to examine the nature of the finance-growth relationship in the oil-producing countries and compare that with the same relationship in the non-oil producing countries. We purposely selected thirty countries based on the magnitude of the oil production from every continent, we also selected a sample of thirty non-oil producing countries and we sub-divided the samples into two based on the positive and negative indices for institutions in each country. We employ dynamic panel GMM and threshold regressors to analyze our data. We obtain very useful results. We have evidence of “too much finance” and inverted U-shaped functions in all our models. The threshold points in the two samples and the sub-samples were quite revealing. In the oil-producing countries, the thresholds were at 10.62% for the whole sample, 5.38% for the sample with negative indices for institutions, and 79.11% for the sample with positive indices for institutions. The thresholds were different and better in the non-oil producing countries: 14.81% for the whole sample, 14.71% for the countries with negative indices for institutions and 142.25% for countries with positive indices for institutions. Based on our results, we suspected the syndrome of “resource curse” in financial sector development. The implications of our findings are discussed, policy suggestions and areas of further research are articulated. In chapter four, we take up an interesting ramification of financial sector development -the structure of the financial sector (bank-based vs. market-based) and examine to see if it matters in economic growth and growth volatility. Our time series data came from the context of Nigeria from 1980 – 2015. We analyze our data using ARDL estimator. Our results were important for finance-growth literature and policymakers. Market-based financial structure distinguishes itself with a stronger effect on economic growth and growth volatility. These results agreed with the recent literature on the subject and had a huge implication for financial sector development in developing countries. We discussed these implications and suggested policy reforms for economic growth ambitions coming from the heels of financial development. In our chapter five, we examine a unique and interesting aspect of financial sector development and how it solves funding problems for the small and medium scale enterprises (SMEs). Our focus in this chapter is the increase in the physical structure of the financial sector unlike the functional - the depth, efficiency, and access which we considered in the previous chapters. We examine how the creation of the second-tier stock exchanges help SMEs to access funding when extant research believe that stock exchange services are spatial proximity bias. We use Logistic regression to analyze data from Nigeria and found evidence confirming the stock exchange spatial-proximity bias. We confirm the apparent discrimination of stock exchanges in the allocation of funds to firms located far away from the exchanges. We discuss the implication of this result including the skewness in development among regions, resources allocation efficiency and policy miscarriage in the existing practice. We recommend reforms to correct the situation.Item Removing the veil for the shadow banking system in China(2016-01-29) Chen, Nuoya;The paper aims to analyze the development of the shadow banking system in China and its role in the rapid economic growth in China for the past three decades. The shadow banking system supports small and medium sized firms and agricultural development projects. This has an important impact on poverty reduction in China as farmers largely refer to informal financial channels to get credit support for seeds, chemicals and animals. The shadow banking system offers credit supplies to lenders who cannot easily obtain credit from the official banking system. The credit supplies they offered use different financial instruments, come with higher interest rates, and were often disguised as financial products landing within the regulatory framework of the administration. The commercial banks also used the shadow banking financial instruments to meet capital thresholds from the People’s Bank of China. As a result, the shadow banking products create longer credit chains, distort credit flows in the financial system by diverting investments into short-term, high return, more risky financial markets. The turbulences in the interbank transaction market, the financial derivative market, the stock exchange markets (including the main-board, the “second tier” market for SMEs and the “third tier” market for start-ups), and the real estate market are all heavily involved in transactions conducted by the shadow banking entities. The shadow banking system in China has been expanding at a pace beyond the current regulatory structure. The internet P2P investment platforms, for instance, become popular with investors and raise funds up to RMB 1 billion each platform. There exist over thousands of internet investment portals, the most popular one being “Yu E Bao”, offered by Alibaba.com. The traditional regulatory institutions, however, do not cover shadow banking investment activities made online. Neither are insurance offered to insurance made online; as the new deposit insurance scheme only cover deposits made in the official banking system. With the ambition of boosting the internationalization of the RMB, financial deepening and economic reforms in China, the financial regulators in China face the dilemma resulting from the regulatory arbitrage associated with the expanding shadow bankinBBC system. Individual investors in China purchase the shadow banking investment products and assume their purchases come with implicit government guarantees, such as wealth management products sold by commercial banks for trust companies and local government investment platforms. On the other hand, it is critical for investors to make rational investments; thus, regulators are obliged to remind investors of risks related to the shadow banking products, that the fantasy of governments repaying failing shadow banking investments will be not realized. It is also the responsibility of the regulators to divert funds collected by the shadow banking entities to long-term investments to build up industrial bases. The financial deepening in China required the transformation of the shadow banking entities and financial products offered into ones with adequate capital cushions and sufficient liquidity. The internationalization of the RMB necessates the opening up of the capital, hence financial account in China. However, the 1997 Asian financial crisis, and the hyperinflation resulting from the dollarization in Latin America has led the Chinese regulators to be cautious in conducting currency liberalization and financial reforms. The opening up of the financial account with the liberalization of the exchange rate regime doubles the financial risks, increases the possibility of financial crises, and may result in the stagnation of economic growth. The function of the central bank as the lender of the last resort demands effective and prudential regulations for SIFIs, and also seeks to functioned to boost market confidence. At this critical turning point of the Chinese economy, defining the role of the shadow banking system, bringing them into the regulatory framework, and identifying risks created should be the priority of the financial regulators in China.Item Financial analysis of the South African life insurance sector: an empirical decomposition of Economic Value Added(2015) Mangenge, TakalaniThe main purpose of the study is to determine which value drivers of economic value added (EVA) are most important. That is, what are the main determinants of the overall company value? The three main questions raised in the study are: (1) How sensitive is total EVA to changes in each of the various value drivers? (2) Which of the value drivers are more important in managing economic value? (3) Is there a combination of these value drivers that best explain EVA as a group? The study, which adopts the Stewart (1991) definition of EVA, covers the life insurance sector in South Africa, specifically focusing on the following companies: Discovery Holdings, Liberty Holdings, MMI Holdings, Old Mutual plc, and Sanlam Ltd. It covers the period 2004-2014 and uses variance analysis and principal component analysis to identify the main drivers of EVA. Five main drivers of EVA were identified namely; underwriting, asset management, costs, opportunity cost and strategic investments.Item The measurement of post-acquisition performance in RSA using economic value added (EVA)(2014-01-02) Makhele, Amos TlaliThis study re-examines post-acquisition performance of acquiring firms in South Africa using Economic Value Add (EVA). Investigation of the 336 acquisitions occurring during 2000 to 2011 reveals that acquiring firms experience significantly deteriorating EVA after the completion of acquisitions. Further, this study evaluates the performance of other traditional accounting measures including Earning per share (EPS), Return on capital (ROC), Return of Assets (ROA) and Return on Equity (ROE) post acquisition. The results suggest that acquiring firms tend to experience slightly improved performance after completion of the acquisitions when using traditional accounting measures. But the improved operating performance is wiped out by capital costs of the large premiums paid to the target firm, creating no real economic gains to the acquiring firm‘s shareholdersItem African frontier markets: extent of illiquidity and inherent private equity investment opportunities(2013-08-27) Du Toit, Willem JohannesThis study investigates the current private equity market in African frontier markets as well as inherent investment opportunities in these African frontier markets. The research includes an analysis of, inter-alia, the following: the development of capital markets in Africa, the classification of African frontier markets, the measurement of liquidity, the relationship between liquidity and asset prices and the history of private equity. This study will highlight to policymakers both in African and in donor capitals the need to implement strategies that will support investment (especially private equity investment) into the continent. The research carried out in this study should contribute to a better understanding of illiquidity risks of African frontier markets and show how these can be mitigated. This study will also provide key information on African frontier markets to investors and fund managers in order for them to understand that a typical investment strategy for investing in developed markets cannot be applied to frontier markets. The study analyses data of listed stocks on selected African stock exchanges and compares this to data for similar stocks listed on developed world stock markets to examine the relationship between liquidity, earnings multiples and market capitalisations for these stocks. Interestingly, results show that, while there is no relationship between the liquidity of stocks and the Price Earnings (PE) multiples of stocks, there is strong evidence to suggest that a relationship exists between the liquidity of stocks and the Enterprise Value to EBITDA (EV/EBITDA) multiples of stocks. Furthermore, we find strong evidence that African frontier market stocks are significantly less liquid and have lower earnings multiples than stocks with similar market capitalisations listed on stock exchanges in the developed world.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.Item Bank disintermediation: South Africa(2012-06-29) Chetty, KubandranThe conventional theory of financial intermediation suggests that banks are the main conduit between savers and borrowers however, research has shown that international banks are losing importance in intermediating i.e. mobilise savings and allocating these funds among competing borrowers - this international reality is due to a number of reasons including changes in regulation, growth in capital markets, non-bank financial intermediaries, foreign competition etc. South Africa has a highly concentrated banking sector with the five largest banks holding more than 90% of the industry’s assets however growth in non-bank financial intermediaries are threatening the intermediary role and profitability of banks - this research serves to investigate whether bank disintermediation is occurring in the South African context and whether the traditional role of banks is declining.Item The effect of macroeconomic conditions on the capital structure adjustment speed of South African listed firms(2012-06-29) Krishna, SudhaThis paper uses a two-stage, dynamic partial adjustment model which accounts for potential mean-reversion, with the Arellano-Bover GMM estimation technique, to observe the effect of various macroeconomic variables on the speed at which South African listed firms adjust toward their target capital structures. Employing two definitions of financial constraints, these effects were also compared for financially constrained and unconstrained subsamples. Using a sample of listed firms spanning from 2000 to 2010, the findings of the study show some indication that firms adjust faster in unfavourable macroeconomic states relative to favourable states. There is also evidence to suggest that the adjustment dynamics of unconstrained firms differ from that of constrained firms. In addition, higher adjustment speeds are generally observed when using short-term debt relative to other debt definitions. However, the evidence is largely inconclusive as adjustment speed estimates are highly sensitive to the definition of financial constraints used, and to the inclusion of extreme leverage observations.