3. Electronic Theses and Dissertations (ETDs) - All submissions
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Item 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 The capital structure and its impact on firm value of JSE securities exchange listed companies(2013-08-27) Mohohlo, Neo RoseThe capital structure theory was pioneered by Modigliani and Miller (1958). In their study, Modigliani and Miller (1958) argued that capital structure was irrelevant to firm value. There is also significant theory on the capital structure of firms and its determinants. Using a panel of non-financial firms listed on the JSE Securities Exchange, we investigate the relevance of capital structure on firm value and investigate the capital structure of firms in South Africa. The results of the analysis on the relevance of capital structure on firm value indicated that there is no statistically significant relationship between firm value and the capital structure of firms. This analysis was conducted for the general sample of firms in the study, within industries and by firm size, however, the results were consistent throughout all the analysis. The results of the capital structure and its determinants analysis indicated that South African firms followed a pecking order theory. The results also indicated that profitability, size, asset tangibility and tax shield has a statistically significant relationship to gearing or the firm’s capital structure. The analysis of the South African firms’ capital structure indicated that firms in South Africa tend to use more long-term debt than short-term debt. The leverage ratios also differed among industries with the Health care industry having the highest levels of leverage and the Technology industry having the lowest levels of leverage.