Faculty of Commerce, Law and Management (ETDs)

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Has files: YesSubject: search.filters.subject.Johannesburg Stock Exchange (JSE)

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    The interdependence of the JSE All Share Index and the S&P 500 Index
    (University of the Witwatersrand, Johannesburg, 2024) Manyumwa, Tonderia; Odei-Mensah, Jones
    Purpose: This paper seeks to understand if such an association exists between these two markets in recent times and to examine the extent to which it exists if the association is present. Method: As markets become increasingly interconnected, it becomes imperative to constantly examine and monitor the evolving patterns of dependency. This entails exploring metrics such as correlation breakdowns, and other measures that capture the extent to which stock market comovements are affecting global investors. Therefore, the existence of strong interconnections and co-movements among international stock markets calls for continued monitoring and the studying of the patterns of interdependence, as this research will inform investors, policymakers, and financial institutions to better navigate the intricacies of global markets and make informed decisions to safeguard the general financial stability of the financial sector and optimize portfolio performance on a risk-adjusted basis (Moiseev and Popova, 2021). In this research paper, empirical evidence of international stock market interdependence has been further assessed in a way that has not been evident in the literature review as follows. This paper examines the interdependence of the Johannesburg Stock Exchange (JSE) with the US stock market, using a modified GARCH model called the Dynamic Conditional Correlation model. The analysis uses weekly log returns from January 2011 to December 2022, with data sourced from Bloomberg. Key Findings: The results indicate a strong interdependence between the two indices. Specifically, the DCC-GARCH model reveals that the previous period’s residual positions and volatility significantly influence the current period’s volatility for both indices. This indicates that global market shocks have a substantial impact on the South African market, diminishing the diversification benefits of including the S&P 500 in a South African portfolio. Recommendations: Given the strong interdependence, South African investors should consider exploring alternative international markets or asset classes to achieve effective diversification. Policymakers and financial institutions should also take into account the significant influence of global market dynamics on local markets when developing investment strategies and regulations
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    The effect of employee share ownership on company performance in South African mining
    (University of the Witwatersrand, Johannesburg, 2014-08) Khan, Shameegh
    This study investigates the effects of Employee Share Ownership Plans (ESOP’s) on company profitability in the South African mining industry for companies listed on the Johannesburg Stock Exchange (JSE). The South African mining industry has been in the global spotlight since the Marikana miners’ strike of 2012 and the subsequent killing of 34 people on 16 August 2012. ESOP’s can be used to stabilize the sector by alleviating some of the tension that is present between workers, shareholders, management and government. This research uses the same measurement as Spiess and Affleck-Graves (1995), who measure share price performance as a cumulative average of returns (CAAR) over a five year period. Regression analysis is used to test for correlations and descriptive statistics is used to explain findings (Spiess & Affleck-Graves, 1995). The difference between companies that do not have ESOP’s in place is negative for (CAAR) compared to those who have an ESOP in place. This is consistent with the theory and findings of studies such as Robinson and Zhang (2005). It has been applied to the South African context within the JSE listed mining sector. The theory that ESOP’s will improve profitability of a company listed on the JSE within South African mining has been found to be statistically significant. ESOP’s can help improve cumulative profits and help transform the industry through share ownership of workers which will help decrease the gap between CEO’s remunerations and the lowest paid workers.
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    The relationship between dividend policy and agency costs of non- financial listed firms on the johannesburg stock exchange (JSE)
    (University of the Witswatersrand, Johannesburg, 2023) Simane, Madou Evah; Mbululu, D.
    This study aimed to investigate the relationship between dividend policy and agency costs of non- financial firms listed on the Johannesburg Stock Exchange (JSE). The study was conducted using the dividend policy and agency theory framework. Data for the study was collected from Bloomberg and IRESS databases. The statistical software E-views was used for detailed analysis. The study used panel data for 67 JSE-listed companies for the period 2011 to 2022. The results showed that dividend payment has a negative relationship with asset turnover ratio, implying a positive relationship with agency costs. On the other hand, the management expense ratio as a proxy for agency costs showed that dividend payment can help reduce agency costs, consistent with the agency theory. The results further revealed that financial leverage can reduce agency costs. However, it could not be considered a significant factor in the reduction of agency costs because it is not statistically significant. Nonetheless, it can still play a role in helping resolve agency disputes among managers and shareholders. The results confirmed that there are agency problems among JSE-listed firms even though they are paying dividends.
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    The trajectory and determinants of dividends on the Johannesburg stock exchange
    (2022) Sekgosana, Nomasonto
    This study examines factors affecting the decisions of firms to pay dividends using non-financial firms listed on the Johannesburg Stock Exchange (JSE). The study uses 1) descriptive statistics to draw trends from the data, 2) logit regression using firm-specific factors as independent variables and a firm's decision to either pay or not pay dividends, 3) and portfolio analysis to check the robustness of the results. There is confirmation that firm-specific factors and propensity can explain the declining number of dividend-paying firms over the sample period. The South African stock market has seen a significant decline in the number of firms paying dividends from 1994 to 2020. Additionally, the pool of JSE firms declined from the late 1990s to the early 2000s. However, the overall number of firms on the JSE has remained stable since 2004 while that of dividend-paying firms continuously declined throughout the sample period. Thus, the shrunk market of the JSE does not seem to explain the drop in the number of firms paying dividends. In pursuit of specific reasons to explain the declining dividend payment trend, the study proposes five hypotheses based on the evidence from the literature. The first four predictions are based on firm-specific factors (profit, size, free cash flow and investment opportunities), while the last one is based on the propensity of firms to pay dividends over the sample period. All three methods of analysis used show either very strong or some evidence that profitability and size play a significant role in the decision of a firm to pay dividends. Although there is evidence regarding a firm’s investment opportunities, the study shows that this would be subject to a particular time frame and the size of the firm. Additionally, the fifth prediction based on the firms ‘propensity to pay dividends was supported by all three methods of analysis. Therefore, firms, in general, were less inclined to pay dividends over time during the sample period irrespective of firm-specific factors. Furthermore, the study incorporates the contribution of certain major economic and regulatory events in explaining the observed declining number of dividend-paying firms.
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    Chinese stock market conditions and herd behaviour on the JSE: Evidence from idiosyncratic volatile stock portfolios and industry sector
    (2021) Bernstein, Shaun
    The intention of the study was to broaden the knowledge and understanding of herd mentality on the JSE 40. Herd behaviour has the potential to destabilise and deteriorate financial markets, and a better understanding of this behaviour could minimize investment loss. Therefore, the study examined herd behaviour in terms of various idiosyncratic volatile stocks and different industry sectors using a dispersion-based model. The study also investigated whether or not Chinese market conditions influenced herd behaviour regarding those stock portfolios. The results suggest that fully and partly diversified portfolios tend to show evidence of herd behaviour. However, Chinese market conditions affect each stock portfolio differently. For example, the Industrial Portfolio Index was influenced by Chinese market conditions across all tranquil and turbulent periods. Meanwhile, other portfolios were only influenced by long tranquil or extreme volatile periods in the Chinese market. Interestingly, the Banking sector was the only stock portfolio that was not influenced by the Chinese market. Perhaps investors can use this knowledge to enhance their future portfolio returns.
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    Performance effects of groupthink in the boards of directors of JSE listed companies
    (2021) Smith, Gavin Shaun
    Board members serving on corporate boards are expected to act objectively and in good faith. Even if the intention is such, cognitive biases are at play which may serve to alter the decision-making process of a board of directors as well as its comprising members. A specific group of cognitive biases – assembled under the banner of the term “groupthink” – are an example of one such phenomenon resulting therefrom. While groupthink is understood in terms of technical composition and sociological presentation, the mechanisms by which groupthink impacts firm performance have not been isolated and understood, and therefore cannot be purposefully affected. This study aimed to lay the groundwork for research into understanding fully the mechanisms by which groupthink affects performance of the boards of Johannesburg Stock Exchange (JSE ) listed companies as well as, subsequently, the firms which they serve. The study aimed to execute this by measuring quantitatively the presence of groupthink-linked proxies in the boards of JSE listed companies and thereafter correlating said proxies to firm performance measures – including, but not limited to, financial performance. Multiple statistically significant correlations were found to exist, encouraging the researcher’s hypothesis that groupthink has a statistically significant and material effect on the boards of JSE listed companies as well as, consequently, the firms which they serve
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    The impact of monetary policy announcements by the South African Reserve Bank on stock market returns using forward rate agreements
    (2021) Mabasa, Nhlamulo Collins
    The objective of this paper is to explore the unanticipated impact of monetary policy announcements on stock market returns using Forward Rate Agreements (FRAs).This paper looks at the Johannesburg Stock Exchange (JSE) All Share Index and two other sectoral specific stock market indices (Financial and Industrial sector indices) and assess the responsiveness of these stock market returns to unanticipated monetary policy announcement shock. In an attempt to understand this relationship between monetary policy and the stock market, the main empirical view suggests that decomposing monetary policy changes into anticipated and unanticipated components is crucial for discerning their effects. The decomposition of unexpected policy rates is based on the futures market. In the absence of the South African interest rate futures market, this study employs a FRA which serves as a measure of monetary policy surprise. This study begins with a 1-dayevent study, which examines the immediate impact of monetary policy shocks on the stock market, and then use an Ordinary Least Squares (OLS) regression analysis, which provides insight to into the dynamic effects of the unanticipated interest rate shock on the stock market. This study employs a time series percentage change daily closing prices of the South African stock market (JSE all share Index, sub-indices), actual changes in the South African Reserve Bank (SARB) repo rate, and the FRA, spanning the period January 2010 through to December 2019, which explores the post-global recession dynamics. The study shows that a hypothetical unanticipated increase of 1% repo rate results in a decline of 0.32 percentage of the Johannesburg Stock Exchange ALL SHARE Index. The findings and recommendations are crucial for the South African central bank authorities and stock market participants as it explains the process through which monetary policy outcomes are transmitted to the real economy, inflation and employment. A future piece of work could contemporarily assess the impact of monetary policy and other sector related and political events on the stock market