Faculty of Commerce, Law and Management (ETDs)
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Item Does Twitter (now known as “X”) disclosure influence share price?(University of the Witwatersrand, Johannesburg, 2024) Minnaar, Courtney; Sebastian, AvaniAn effective corporate communication strategy is essential for firms to establish and maintain good relationships with capital market participants to ensure continued financial support. Firms are increasingly adopting social media platforms like Twitter as a medium of communication. This study investigates the effectiveness of Twitter as a channel for firms to disclose financial performance and enhance their overall information environment, thereby improving share price performance. In doing so, this study seeks to establish whether JSE-firms that tweet about financial performance experience better share price performance. Additionally, this study aims to determine whether share price performance varies depending on the nature of the news, favourable or unfavourable, contained in the tweets about financial performance. This study employs ordinary least squares (OLS) regression analyses using Twitter and share price data of 148 JSE-listed firms over their 2022 fiscal year. This study reveals a positive relationship between the frequency of firms' tweets about financial performance and changes in share price. Additionally, a positive relationship exists between the type of news disclosed in tweets about financial performance and changes in share price. The findings of this study contribute to Agency Theory, Internet Investor Relations (IIR) and dialogic communication literature, as it provides evidence of the benefits of utilising social media as a dialogic communication channel to effectively communicate with capital market participants to improve the firm's information environment to obtain and maintain their continued financial support.Item Potential improvements to South African research and development tax incentives: lessons from BRICS countries(University of the Witwatersrand, Johannesburg, 2024) Mphephu, Keamogetswe; Ram, Asheer J.The South African government is cognisant of the fact that research and development (R&D) is imperative in stimulating innovation, economic development, and global competitiveness. This has resulted in the government adopting various tax incentives to boost R&D activities. Section 11D of the Income Tax Act 58 of 1962 (Income Tax Act) (Republic of South Africa, 1962) governs the R&D tax incentive, which has evolved since its inception in 2006. The initial plan was for section 11D to come to an end in October 2022. However, in the 2023 Budget Speech, the Minister of Finance declared an extension of ten years for the deadline and simplification of the tax provision to enhance effectiveness. This study will analyse South Africa's R&D tax policies in comparison to selected other BRICS member countries (Brazil, Russia, India, China) and examine possible improvements. Through the research study, several important findings were made. One is that R&D tax incentives play a crucial role in stimulating innovation investment by relieving the financial burden on companies and therefore allowing them to focus their resources on R&D. Another important lesson is that streamlining application procedures and providing convenient access to R&D tax incentives play a critical role in promoting high levels of participation and effectiveness. Although the Department of Science and Innovation has taken steps to enhance R&D tax incentives, there remains room for improvement to align them with international best practices. Aligning with international best practices will enable South Africa to improve its R&D tax provision by encouraging innovation and attracting domestic and foreign investment.Item Post Earnings Announcement Drift on The JSE Top 40: A Study on Longer Term Holding Periods(University of the Witwatersrand, Johannesburg, 2024) Msutu, Yonela Neo; Britten, J.This paper studies the existence of the post-earnings announcement drift (PEAD) on the JSE top 40. The sample period used was from 2000-2020. The measures of surprise earnings used in this paper were the standardised unexpected earnings (SUE) and the initial 2-day returns (IR). The existence of PEAD was determined using portfolios sorted half yearly by the surprise measure of which the high minus low quantile spread (QS) was computed. A cross- sectional regression is run to determine if firm characteristics affect the PEAD. Cumulative abnormal returns (CARs) were used as a proxy PEAD and computed using the market model. PEAD drift exists on the JSE top 40, and the QS was found to be persistent for a 480-day trading window for both surprise measures. The PEAD anomaly found by QS was robust to a subsample period and the method of CAR computation. The IR-sorted portfolios generally outperformed the SUE-sorted portfolios. The SUE portfolio coefficients were insignificant in cross-sectional regression, while IR coefficients were up to the 360-day trading window.Item The implementation and practical issues of loan loss provisioning under IFRS 9 in South Africa(University of the Witwatersrand, Johannesburg, 2024) Muroyiwa, Deysel Tichakunda; Brahmbhatt, YogeshPurpose: The study conducts a thematic evaluation of IFRS 9 by focusing on the assessment of credit risk and loan loss provisioning. The aim of the study is to investigate the post- implementation and practical issues that are currently being faced when accounting for ECLs under IFRS 9. This study makes a valuable theoretical contribution by providing primary evidence on the operationalisation issues of loan loss provisioning under IFRS 9. More specifically, this investigation could be beneficial for standard setters, regulators as well as banks, and other financial entities. Research methodology: The study employs a qualitative research approach and semi- structured interviews were conducted as the primary means of data collection. Using both purposive and convenience sampling techniques, a total of ten participants were selected to take part in the study. The data gathered during the interview process was transcribed, analysed, and interpreted using thematic data analysis. Four themes emerged from the data analysis procedure, which are: i) Transitional process; ii) Impact of the transitional process; iii) Governance, processes and controls, and; iv) IFRS 9 impairment modelling judgements. These themes were analysed using verbatim extracts obtained from the interviews. Findings: The study elaborated on two main recent evolutions of financial instrument systems, namely IAS 39 and IFRS 9. Under IAS 39, the research highlighted that there is no recognition of expected losses stemming from future events. Financial institutions were required to deal with losses only after the occurrence of a negative event, already affecting credit quality. The recently introduced IFRS 9, which came into force in January 2018, marked a paradigm shift from incurred loss to expected loss but differed at the moment at which expected losses are recognized as it demanded to account for the expected losses in the next 12 months as long as the asset did not show a significant increase in risk, thereby triggering the recognition of the ECL for the remaining lifetime. The importance of applying reasonable judgement guided by and within conceptual or standard-level boundaries was also discussed in the study. It was also argued that IFRS 9 places great responsibility on the judgement of prudential supervisors mostly because of their role in ensuring the accurate use and implementation of IFRS 9. Their role mostly involves a thorough assessment of banks to determine whether appropriate credit risk management practices are implemented, assessing whether the calculation and measurement of loan loss provisioning are adequate, evaluating whether adequate policies are in place for the early identification of problem assets, and ensuring whether there is consistency in the application of the new accounting standard across institutions. With regards to the issue of preparedness in the transition to IFRS 9, the respondents outlined many activities such as workshops, presentations, and training by various experts in the accounting, statistical, economic, and actuarial fields to better prepare users of IFRS 9. Although numerous benefits come with the implementation and transition from IAS 39 to IFRS 9, entities also faced huge challenges. This was unanimously revealed by all the participants as they were in complete agreement that the implementation of IFRS 9 was far more complex than that of IAS 39. These challenges include issues in data and modelling, systems infrastructure, governance and control, cost, and vagueness. Following the challenges been faced, the study also revealed the importance of governance and controls through which financial institutions have to strike the right balance between building a sustainable revenue proposition and ensuring regulatory compliance. The study also revealed 3 key judgement areas of IFRS 9 that have been applied in the impairment of ECLs. Because financial institutions were given latitude to make different judgements when modelling IFRS impairment provisions, the researcher identified that there is alignment and divergences in the identified judgements areas. These judgement areas include the applicable definitions of default, the determining factors in SICR and the structure of forward looking macroeconomic variables. There are also divergences and inconsistencies present in the application of certain key judgement areas in IFRS 9 impairment modelling that was highlighted by some of the participants Originality Value: Studies that pertain to the post-implementation and practical issues of loan loss provisioning under IFRS 9 in South Africa are by no means exhaustive and very limited in number. This study, therefore, contributes to the limited body of interpretive, non-positivist financial reporting research being performed in South Africa.Item Cannabis in the workplace: the implications of enever V Barloworld Equipment, a division of Barloworld SA (Pty) Ltd (2022) 43 ILJ 2025 (LC)(2024) Naidoo, Yuveshen; Pillay, KarminiThe Labour Courts in South Africa face many challenges in respect to cannabis-related issues within the workplace. This has been evident ever since the landmark constitutional ruling of Minister of Justice and Constitutional Development v Prince. The recent judgment of Enever v Barloworld Equipment (Pty), A Division of Barloworld SA (Pty) Ltd), highlights some of these challenges. The core challenge is in striking an appropriate balance between the rights between employers and employees, where our courts appear to tip the scale in favouring the employer. In Enever, despite the court acknowledging the fact that zero-tolerance policies prevent employees from being able to use cannabis within their own space, there was no attempt really made to rectify this issue. There is thus a need to provide greater protection for employees and achieve the ultimate aim of labour law, which is to effectively balance the rights between employers and employees. Another challenge relates to the testing for cannabis within the workplace. With no scientifically accurate method currently available for proving cannabis-induced impairment, many employers are of the view that for as long as an employee simply tests positive for the drug then an employer will be entitled to take disciplinary action. Many employers in South Africa make use of tests, such as urinalysis, which does not help in proving impairment but merely indicate recent use. As will be seen in Enever and various other decisions regarding cannabis, our courts appear to overlook the established jurisprudence in relation to testing for similar substances, such as alcohol, with no real justifications as to why they do this. I will consider two sources of foreign law, namely the United States of America (USA) and Canada respectively. Both jurisdictions have successfully struck a balance between balancing the rights and interests of the employee and employer following a fundamental shift in how cannabis is viewed societally and in the workplace. I will look to USA, where there has been a great shift towards accepting and normalising cannabis use, to determine exactly how selected the states effectively balance the rights between employers and employees. I will also consider lessons from Canada to tackle the testing issues for cannabis within the workplace and look at potential testing methods, which South African employers could adopt. It is clear, there is much development still to be made within the legal framework regarding cannabis regulation in the workplace and, as such, I will investigate and critically evaluate key changes that are likely to impact the regulation of cannabis in South Africa.Item The level of group taxation in South Africa, corporate roll over provisions, key considerations, and challenges(University of the Witwatersrand, Johannesburg, 2024) Ngwenya, Eunice; Blumenthal, RoyGroup taxation refers to a tax system that allows offsetting of losses against profits within qualifying related companies as well as the ability to transfer assets to fellow group companies without triggering any tax liability. Without group taxation, inefficiencies arise whereby at the first instance, some companies within a group may incur a large tax liability while others have large assessed losses that cannot be utilized because such companies continue to incur losses. Secondly, very often companies go through a reorganization of some sort which may include transfer of assets to other entities within the group where synergies may have been identified. These types of transactions often result in significant tax leakages if inter-group transfer of assets which is legally acceptable in terms of other legislations such as the Companies Act 71 of 2008 (“Companies Act”), is not allowed to be on a tax neutral basis. In South Africa, however, group taxation is limited to roll over relief provisions contained in sections 41-47 of the Income Tax Act 58 of 1962 (“the Income Tax Act” or “the Act”), if conditions detailed therein are complied with. So far, there is no other group taxation is allowed. This study seeks to define what group taxation is and what would be achieved if it is implemented, it also outlines the impact of the lack thereof. It examines the legal and regulatory implications of transactions covered by the roll over relief provisions with specific focus being the Income Tax Act, the Value Added Tax Act 89 of 1991 (“VAT Act”), the Companies Act, Transfer Duty Act 40 of 1949 (“Transfer Duty Act”) and Securities Transfer Tax Act 25 of 2007 (“STT Act”). The study also looks at the detailed requirements to be met for each roll over provision to apply in terms of the Income Tax Act, the applicable exclusions and anti- avoidance provisions. It assesses how the roll over provisions are harmonized across the Income Tax Act, the VAT Act, other tax Acts and the Companies Act.Item The Effect of Ownership Type and Corporate Governance on Capital Structure: A South African Perspective(University of the Witwatersrand, Johannesburg, 2024) Notshikila, AkhonaThis study investigates the effect of ownership type and corporate governance on capital structure decisions of non-financial firms listed on the Johannesburg Stock Exchange (JSE). It examines 109 firms listed over a 23-year period from the year 2000 to 2022. The main research question is whether ownership type and corporate governance factors have an effect on capital structure among firms listed on the JSE or not? The rationale for the study is the lack of empirical evidence in the South African context on the countries diverse ownership types and its effect on key financing decisions. Further, the lack of empirical evidence to support among others, principle 7 of the King IV Code of corporate governance which calls for diversity and board independence, drives this research (BDO, 2016). Ownership type variables employed are institutional, managerial and black shareholding. Corporate governance is examined through the lens of board independence, board size, board gender diversity and CEO duality. Using the fixed effects regression model, the results reveal that institutional and managerial ownership both have a statistically significant inverse relationship with firm leverage. Black ownership is generally found to have no effect on capital structure with the exception of short- term debt, where an inverse relationship exists. Board size and CEO duality are negatively related to capital structure, whereas board independence and board gender diversity are positively related to firm leverage.Item The role of corporate governance in reducing illicit financial outflows In South Africa(University of the Witwatersrand, Johannesburg, 2024) Ramparsad, Tia-SchaeIllicit financial outflows have emerged as a significant concern in South Africa, impeding economic growth, exacerbating social inequality, and undermining the country's developmental efforts. This research report aims to investigate the crucial role of corporate governance in reducing illicit financial outflows in South Africa. By examining the factors contributing to these outflows and exploring the effectiveness of corporate governance mechanisms, this study provides insights into how ethical and accountable business practices can contribute to curbing illicit financial activities. This research report highlights significant corporate scandals in South Africa, underscoring the imperative need for strong corporate governance practices to prevent illicit financial outflows. Despite sterling efforts, various areas require improvement and pose distinct challenges. Enforcing corporate governance practices demands adequate resources and capacity within regulatory bodies. Additionally, challenges include the lack of transparency in beneficial ownership and limited shareholder activism, both hindrances to curbing illicit financial outflows. Collaborative efforts are paramount, with stakeholders, including regulatory bodies, companies, shareholders, and the government, working together to fortify corporate governance frameworks, enhance regulatory oversight, foster ethical business conduct, and elevate public awareness. Critical areas of focus encompass strengthening internal controls, ensuring board independence and composition, addressing executive compensation structures, promoting shareholder engagement, enhancing risk management and internal control mechanisms, and improving regulatory oversight and enforcement. Moreover, fostering collaboration among stakeholders and upholding ethical standards are essential elements in curtailing illicit financial outflows, ultimately fostering transparency, accountability, and sustainable economic development in South Africa.Item Do asset pricing models explain sector returns on the Johannesburg Stock Exchange?(University of the Witwatersrand, Johannesburg, 2024) Ranchod, Ishani; Page, DanielThis study is conducted to evaluate whether style factors-based asset pricing models can explain sector returns on the Johannesburg Stock Exchange (JSE). The time frame for this research is between January 2007 to July 2023. Daily return data for both styles and sectors were used and calculated on a buy and hold basis with values that were obtained from Bloomberg and Iress. The methodology applied is a time-series regression used for a Gibbons- Ross-Shanken (1989) alpha test. This research provides investors with valuable insights into the specific asset pricing models and their underlying related style factors that can elucidate the cross-sectional variation of both sector and more comprehensively, share returns on the JSE. The results of the study confirm the effectiveness of various factor models in explaining sector returns on the JSE, with the six-factor model demonstrating superior performance. Notably, the six-factor model exhibits explanatory power for the financial and industrial sectors, highlighting its comprehensive ability to explain sector returns. The significance of size and value premiums across models underscores their importance in sector return analysis. Additionally, the six-factor model strengthens its ability to elucidate cross-sectional variation in styles and sector returns. Overall, the six-factor model emerges as a robust framework for analysing sector returns on the JSE, providing valuable insights into risk factors and how sectors perform.Item How Diversity and Inclusion May Transform South African Commercial Property Organisations at Top Management Level(University of the Witwatersrand, Johannesburg, 2017-08) Motshegare, Reabetswe Regina; Levy, DeborahThe purpose of this report is to outline contemporary transformation frameworks that emphasise diversity and inclusion and how the latter may likely transform Growthpoint Properties South Africa (Growthpoint S.A). The main focus of the consultancy report is to compare and contrast traditional transformation methodologies and contemporary diversity and inclusion methodologies as strategies to assist Growthpoint S.A transform its senior and executive management. The propositions are that; an effective transformation strategy for Growthpoint S.A is one that focuses on identification; inclusion; attraction; diversification and retention of key talent at senior levels. Furthermore, that once diversity and inclusion interventions are implemented, there will be transformation at senior and executive levels. Out of 15 executives in the management team, six representatives were interviewed. The limitations highlight that the majority of participants are South African and may have certain biased perceptions about the topic as opposed to the rest of the participants, who are foreign nationals. The methodology focuses on a thematic analysis and four themes namely: leadership; corporate culture; strategies and communication are identified. Following in-depth discussions, six recommendations are provided. These include 360-degree feedback; diversity and inclusion workshops; introduction of a diversity and inclusion forum; KPI’s that measure diversity and inclusion targets; workplace enhancement programmes that focus on diverse candidates and lastly, robust succession plans. The role of the researcher as a professional Human Resource Business Partner ensured that any work dealt with is approached ethically, and the researcher’s ability to do this ensured quality, reliability, validity and effectiveness of the research.