Wits Business School (ETDs)
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Item The Impact of Employee Shareholding Option Plans on Company Performance in South Africa(University of the Witwatersrand, Johannesburg, 2009-07) Motswenyane, Papillon; Ncube, MthuliEmployee Share Option Plans (ESOPs) are widely applied in the South African context to disseminate wealth to Historically Disadvantaged South Africans (HDSAs). This opinion is affirmed by an increased application of the concept on a number of Broad Based Black Economic Empowerment (BBBEE) transaction deals concluded recently. The research explored the impact of these schemes on company performance and also investigated the resultant economic impact on participating employees. Data was collected from JSE-listed companies that have implemented these schemes over an eight year period between the years 2000 and 2008. Tobin's Q ratios were constructed using data from various sources with annual reports as the primary source of data. An event analysis was undertaken by measuring Tobin's Q of the said companies before and after the implementation of the respective schemes. A secondary process collated data from a survey of employees participating in the schemes to measure their increased productivity and also to ascertain financial employee spin-offs from the schemes. The research found inconclusive evidence that ESOPs impact positively on company performance. However evidence of a strong correlation between potential productivity increases and the schemes was confirmed . Also, a relationship between an employee's level and term of participation to financial reward was established. This research will assist companies in structuring their ESOPs in relation to individual employee contribution to enhance company performance and will also provide guidance on ESOPs financial impact on employees.Item The impact of credit rating changes(2008) Barnard, BrianThe study inquires whether ratings and rating changes in particular have any impact on bond prices. In doing so, the price data of a number of corporate vanilla bonds were investigated over corresponding rating change event periods. For various reasons, the South African Bond Market could not deliver a large sample of plain vanilla bonds that experienced a rating change. Therefore, to complement the study’s main sample, a small sample of callable corporate vanillas was also studied. In both cases the eventual sample sizes necessitated an investigation based on single issues. Neither of the samples contained “serious” rating changes; the lowest rating studied was of lower-medium investment grade quality and none of the rating changes was by more than one notch. Stationarity and unit-root tests were conducted on the non-callable and callable issues’ individual price series to determine whether the issues experienced significant price impacts in response to their respective rating-change announcements. Based on the test-results, only a number of non-callable issues experienced significant impacts. The number shrunk considerably after contamination could be proven in some cases, and when the directions of the yield spread movements were taken into consideration. An even smaller number of callable issues registered significant impacts. Contamination was not that customary in the case of callable issues, but direction of movement still played a role. Overall, out of the ten non-callable issues, none appear to have been impacted by their respective rating changes; out of the nine callable bonds, only one may have been impacted by a rating change, conditional on the issue’s call option. In some cases the rating changes were preceded by rating warnings – whether rating outlooks or rating watches; the study did not investigate whether the market responded to these warnings. The study also concludes that issue-specific characteristics play an important role in determining whether ratings can potentially impact prices. With regards to this – ii Time-to-Maturity is a good example. Additionally, it appears as if rating data should be a lot more issue-based - as opposed to being issuer-based - in order to be of any use, at least in the case of bonds that is. Under the Literature Review, enormous attention is paid to bond price determinants, the impact thereof on credit ratings, and thus the resultant ability of credit ratings to impact bond prices. The review manages to unravel the correlation between credit ratings and bond prices, to some extend. In addition, the study offers new insights into the pricing of risky bonds, particularly through an alternative modelling of default losses.Item Financial derivatives in the South African mining industry(University of the Witwatersrand, Johannesburg, 2006) Josef, AvichayThe purpose of this research was to identify factors which influence the decision to use financial derivatives in the South African mining industry and then to establish their importance to the industry.The research incorporated both qualitative and quantitative primary research phases. The qualitative survey formed the questionnaire framework for the quantitative phase. The quantitative survey formed the bulk of the analysis, and both mean rank tests and factor analysis were employed to interpret the data. Thirteen factors, influencing the decision to use financial derivatives, were identified. However, statistically significant mean rank tests (where p < 0.05) indicated that, out of the initial thirteen factors, the South African mining industry viewed the following to be the most important: 1. Change the Volatility of Cash Flows 2. Improve Value of the Firm 3. Change the Volatility of Accounting Earnings 4. The Size of the Firm 5. The Perceptions of Derivatives Use by Investors, Regulators and the Public It was also found that combinations of factors, rather than individual factors, influence the decision to use derivatives. Therefore, a factor analysis was conducted to identify these various combinations. The analysis yielded seven broadly defined combinations of factors which incorporated the top five factors and were able to explain most of the variance observed from the original thirteen factors. These seven combinations were: Perceptions and External Finances Cost of Capital and the Value of the Firm Volatility of Accounting Earnings Size of Firm Availability of Information Financial Distress Political and Country Instability Furthermore, outputs indicated that the use of financial derivatives and the relative importance of factors in terms of derivative usage may be influenced by factors other than those discussed in this research.Item Marketing financial services to the previously excluded in South Africa(University of the Witwatersrand, Johannesburg, 2008) Arthur, Theo DonavonLimiting access to a company’s services or discouraging the demand coming from certain customers is not an uncommon practice. Suppliers of services and goods often select a target market that would provide a minimum expected value and exclude the rest. In the financial services sector the lower income segment have always been excluded on the basis that they do not provide this minimum expected value (Sharma, 2003). In South Africa, however there is a renewed interest in targeting this lower income sector. This renewed interest in targeting the lower income sector in post apartheid South Africa is not just because there is value and benefits to companies who target this market (Prahalad, 2004), or the recognition that financial service development causes growth and poverty alleviation (Porteous, 2004; Beck, 2004), but it is also in place to address the imbalances caused by an apartheid system. Although South African financial service providers find themselves with similar challenges of a developing economy, the South African environment is a unique one. Practices of exclusion have not just segmented on the basis of income, minimum value expectations, education and status but also on race. In reentering this market, many providers are finding themselves unprepared for the challenges of this once excluded sector. Whilst cost, accessibility, insufficient discretionary income and literacy have been identified as the key factors that hinder the consumption of financial services, the Financial Sector Charter of 2003 identified that the South African financial sector had failed to increase participation of the previously excluded and limited access to its services (Crotty, 2005; Prahalad, 2004; Barr, 2004; Sharma, 2003). By committing to the targets of the Charter many of these financial institutions, which include banks, long - term insurers, short - term insurers, re-insurers, collective investment schemes, investment managers, retirement funds and licensed exchanges, find themselves targeting a market which they previously excluded. A further challenge to financial service iii providers in South Africa is that little research has been conducted on the unique situational variables that impact the South African economy. The purpose of this study is therefore to identify and explore the challenges that the previously excluded market presents to financial service providers who wish to re-enter this market in South Africa. It also investigates the appropriateness of segmentation tools and assesses how best to target this market. The research methodology employed focussed on a literature review which aimed to identify the factors that influence financial service consumption. It then discusses the various segmentation models and the best strategy to target this market. Focus groups were used to gain insight and understanding of this market. Data was then collected and analysed. The findings and discussion highlight that it is imperative to understand the changing demographics, social and cultural influences and the impact of historical practices prior to providing financial services to a market that was previously excluded. Factors that are unique to South Africa i.e. self exclusion, crime, non traditional market instruments and costs were also identified. These factors are discussed in this study. It is hoped that this study will assist providers of financial services in formulating strategy that would increase consumption of its products and services and in so doing contribute to the growth of the economy whilst addressing the imbalances of the past.Item Standard Bank's entry strategy into Africa(University of the Witwatersrand, Johannesburg, 2006) Armstrong, GarethEmerging markets offer atractive business opportunities to international companies. This is due to their high margins, as a result of the risk-reward trade-off and the large customer base that can realise economies of scale in a short period of time. Concomitantly, South African banks are following their clients into Africa in order to provide them with corporate financial servies. In addition, a largely under-serviced local population provides an ongoing customer base for retail banking offerings. Standard Bank has the largest presence of any South African bank in Africa, conducting business, as it does, in seventeen African countries. The current research has identified economic and political factors in emerging markets that are likely to have the most significant impact on Standard Bank's operations in Africa. Additionally, the implication that these conditions hold for the choice of entry strategy was also investigated. The finidngs indicated that Standard Bank's corporate strategy for Africa plays a larger role than do the emerging market conditions when deciding on acquisition versus greenfield entry into a particular markets. Standard Bank also derives a first-mover advantage (FMA) in both the corprate and retail banking spaces in new markets.Item The role of government support programmes in SMME development in South Africa(University of the Witwatersrand, Johannesburg, 2009) Archary, Byren, M.The previous Minister of Finance, Mr Trevor Manuel, once stated that small business represents an important vehicle to address the challenges of job creation, economic growth and equity; given the appropriate enabling environment, it can make an indelible mark on the South African economy. This report set out to determine the role of government support programmes in developing the SMME sector in South Africa. To address this problem, the research was segmented into the following critical questions: · What is the prevailing opinion on the impact of government support programmes thus far in promoting small business development? · In the face of the prevailing enabling landscape, which factors continue to influence the development of small businesses in South Africa? This exploratory research used a qualitative approach to collect data. The sample consisted of an official from a government department, four representatives of small business support agencies and 31 small business owners. In total the sample consisted of 36 participants. Although a qualitative approach has been criticised for being anecdotal and lacking both the means to reproduce and generalise the outcomes, multiple data streams were used to ensure the integrity and reliability of the results. Two interview schedules were developed and used during the semi-structured interviews to collect the primary data. The first schedule was developed specifically to solicit responses from government and small business support agencies. The second schedule was used when interviewing small business owners. iii To counter the threat of an illogical and poorly constructed interview schedule, this research ran a pilot study as part of its verification exercise. The interview schedule was sent to five policy beneficiaries (i.e. small business owners) for comments and suggestions on improving it. These five small business owners did not form part of the final sample. Based on the balance of evidence, the market regarded the impact of the government support programmes as ineffective and having done little to develop and grow the sector. The prevailing opinion was that policy and strategy seemed effective only in theory. Furthermore, support agencies were regarded as ineffective and seen to be operating in isolation of each other and government. Officials from these agencies were not adequately trained to assist small business owners with queries and advice. Equally discouraging, the research uncovered that historical factors limiting the growth potential of small businesses persisted. This means, that although government has promulgated several pieces of legislature such as the Small Business Development Act and the Integrated Strategy on the Promotion of Entrepreneurship and Small Enterprise to improve the small business landscape, it has failed to address the basic problems of finance, training and development needs, shortage of scare skills and improving business skills sets. The role of government support programmes is therefore proving to be ineffective because of several reasons: · Poorly trained officials that offer ineffective advice and information to small business owners; · A lack of dynamic and sustainable marketing campaigns that draw public attention towards the support programmes available; · A lack of a central repository of information related to the small business sector; · Tedious and bureaucratic processes that offer neither acknowledgment of receipt of applications nor notification of awards; iv · Small business support agencies working in isolation of government programmes and at times offering contradicting information with regard to the tender application processes; Addressing these pitfalls and ensuring proper implementation and synergy strategies will ameliorate the impact of government support programmes in developing the small business sector in South Africa. This report concludes by making some recommendations on how these pitfalls may be overcome.Item Financial services firms' criteria for differentiating betweem emerging markets in sub-Saharan Africa(2009) Antrobus, FrancisAs local legislation and market saturation curtail their growth and profitability, South Africa financial services companies are looking for new markets in Sub Saharan Africa at an astounding rate. This research looks at key attributes of markets within Sub Saharan African countries and analyses how the decision makers within financial services firms priorities these attributes when making expansion decisions in this regard. The research has two main purposes. Firstly, to empower corporate decision makers to quickly analyse all possible markets using readily available data, and in so doing, build a short-list of possible target investment destinations. Further, it aims to guide policy makers for these same countries to create meaningful frameworks that encourage foreign direct investment. Charalambous‟ 2006 qualitative study was used as a basis for this quantitative study. A subset of five of the ten attributes used by Charalambous (2006) were used and an additional attribute recently cited in similar literature were tested in a conjoint study. Convenience sampling with a snowball element was used to gather the respondent data. The questionnaire which was designed on the basis of choice-based conjoint analysis was first subjected to a qualitative pilot phase in which personal interviews were conducted by the researcher in order to screen and validate the questionnaire. The questionnaire was then published on the internet and response data was gathered electronically. There were a total of 30 valid responses. Respondent‟s demographics were widespread across various sub-sectors of the financial services industry. It therefore transpires that some demographic groupings were small in size and hence some caution must be exercised when extrapolating the findings to the population. Data was analysed using Sawtooth™ and NCSS software, interpreted and presented. Key findings from this research include: the top three scoring attributes account for seventy percent of the decision process when financial services firms evaluate iii foreign markets. These attributes are: market size and demand conditions, country governance and political risk, and economic environment and macroeconomic performance. All of these attributes contribute more than twenty percent to the decision. If policy makers want to attract FDI in this sector, favourable policy should be drafted in this regard to ensure maximal attractiveness to the foreign investors.Item The impact of brand equity and product augmentation on purchasing industrial commodities.(University of the Witwatersrand, Johannesburg, 2006) Alexander, Nicholas StewartThe purpose of this research was to establish the impact of brand equity and product augmentation on purchase decisions involving industrial commodities. The field of investigation was that of industrial tyres in the South African open cast mining industry and the sample was extracted from buying centre members who purchased tyres for earthmoving equipment for use on coal mines in the Mpumalanga Province of South Africa. Literature pertaining to commodity products, brand concepts and consumer brands forms the basis of the literature review; whereafter specific study on industrial branding and the buying centre were explored. The research method used was a conjoint analysis experiment which was constructed following a series of pilot studies to determine the key factors in industrial tyre procurement. The findings were that brand was indeed considered of primary importance in tyre procurement, demonstrated by each buying centres' willingness to pay a premium price for their preferred brand of tyre. Product durability and price were second and third in importance respectively. The augmented product attributes of delivery lead time and technical support were considered least important of the five attributes. These results have important implications for mining company procurement departments as well as tyre suppliers. Mining companies may be paying premium prices for tyres which are a considerable cost element in running expenses for heavy machinery. On the other hand, well known tyre supply companies may be able to expand their market share and improve profitability through the use of this information.Item Validating the corporate entrepreneurial assessment instrument in South Africa(University of the Witwatersrand, Johannesburg, 2005) Alcock, SimonThe Corporate Entrepreneurship Assessment Instrument (CEAI) was developed in North America to measure the attractiveness of the internal environment of companies to corporate entrepreneurs. The objective of this research was to validate the Corporate Entrepreneurship Assessment Instrument in South Africa. Data from a study of South African middle managers was analysed to assess the CEAI’s reliability and validity. While the CEAI is reasonably reliable, there are problems with its validity in South Africa. Some of the factors of the CEAI were correlated, contradicting one of the assumptions made by the original authors. Some items did not appear to contribute significantly to any of the factors, while others were ambiguous. The data was examined further, and several options for improving the CEAI were proposed. These included changing the number of factors, changing the number of items in each factor, rewording or removing some of the items, and adding new items.Item Strategy communication effectiveness in the South African banking industry.(University of the Witwatersrand, Johannesburg, 2008) Alagbaoso, Manessah O.; Christie, PeterIn the business environment of South African banking industry, informed and committed employees are a source of competitive advantage. More than ever before, organisations’ strategies need to be effectively communicated, understood at all levels, and effectively implemented. The purpose of this study is to examine factors responsible for the effective communication of strategy between the head office and the network of a South African banking organization using the face-to-face medium. The data for this study was collected via a questionnaire and statistically analysed using Descriptive Statistics, Factor Analysis, Cluster Analysis and Analysis of Variance (ANOVA). A five-factor solution was obtained and the factors are: 1. Interpersonal Communication; 2. Change and Improvement; 3. Employee Involvement in Strategy Formulation; 4. Stability; and 5. Vertical Communication. Of these five factors, the first three are deemed significantly important to strategy communication effectiveness and factors one and five are specifically important to effective strategy communication through the use of the face-to-face medium. The Cluster Analysis resulted in six clusters named: 1. Best of both worlds; 2. Specialists; 3. Elitists; 4. Bureaucrats; 5. Salesmen; and 6. Ostriches. The research confirmed the importance of the involvement of all levels of managers in strategy formulation and the predominant use of the face-to-face medium for effective strategy communication. Other key recommendations include the use of managers that have been in the organisation for more than six months and less than ten years for policies related to strategy communication, and the specific use of middle managers to oversee policies related to strategy communication using the face-to-face medium.