South African Capital Structure Decisions: A Survey of Listed Companies

2016 ◽  
Vol 17 (2) ◽  
pp. 167-187 ◽  
Author(s):  
Lambert H. de Wet ◽  
Sean Joss Gossel
Keyword(s):  
Capital Structure ◽  
South African ◽  
Listed Companies

An analysis of cost of capital, capital structure and capital budgeting practices: a survey of South African listed companies

2008 ◽  
Vol 16 (2) ◽  
pp. 31-52 ◽  
Author(s):  
C. Correia ◽  
P. Cramer
Keyword(s):  
Capital Structure ◽  
South African ◽  
Cost Of Capital ◽  
Emerging Market ◽  
Capital Budgeting ◽  
Listed Companies ◽  
Sample Survey ◽  
The South ◽  
Equity Ratio ◽  
Finance Theory

This study employs a sample survey to determine and analyse the corporate finance practices of South African listed companies in relation to cost of capital, capital structure and capital budgeting decisions.The results of the survey are mostly in line with financial theory and are generally consistent with a number of other studies. This study finds that companies always or almost always employ DCF methods such as NPV and IRR to evaluate projects. Companies almost always use CAPM to determine the cost of equity and most companies employ either a strict or flexible target debt‐equity ratio. Furthermore, most practices of the South African corporate sector are in line with practices employed by US companies. This reflects the relatively highly developed state of the South African economy which belies its status as an emerging market. However, the survey has also brought to the fore a number of puzzling results which may indicate some gaps in the application of finance theory. There is limited use of relatively new developments such as real options, APV, EVA and Monte Carlo simulation. Furthermore, the low target debt‐equity ratios reflected the exceptionally low use of debt by South African companies.

scholarly journals The relationship between debt levels and total shareholder return of JSE-listed platinum companies

2016 ◽  
Vol 6 (1) ◽  
pp. 7-13 ◽  
Author(s):  
Sandra Jooste ◽  
Susanna Levina (Sanlie L.) Middelberg ◽  
Merwe Oberholzer
Keyword(s):  
Capital Structure ◽  
South African ◽  
Significant Positive Correlation ◽  
Precious Metals ◽  
Listed Companies ◽  
The Body ◽  
Positive Correlation ◽  
The Core ◽  
The Relationship ◽  
Debt Levels

The purpose of this study is to investigate empirically whether there is a positive correlation between debt levels and total shareholder return (TSR) of platinum JSE-listed companies. The study field comprised annual analyses for 12 companies listed under the Platinum and Precious Metals sector on the JSE Ltd for the 14-year period 2000 to 2013. The results of the study were inconclusive as a statistically significant positive correlation between changes in debt levels and changes in TSR could only be found in two of these years. The core audience of the study will be the management of South African platinum companies considering changes in their capital structure, and investors considering investment in a listed platinum company. The contribution of the study is therefore to add to the body of literature on capital structure decisions from a South African platinum mine context.

scholarly journals Capital structure and profitability: An empirical study of South African banks

2016 ◽  
Vol 14 (1) ◽  
pp. 8-19 ◽  
Author(s):  
Kudzai Raymond Marandu ◽  
Athenia Bongani Sibindi
Keyword(s):  
Capital Structure ◽  
Credit Risk ◽  
South African ◽  
Time Series Data ◽  
Emerging Market ◽  
Strong Relationship ◽  
Capital Adequacy ◽  
Series Data ◽  
Bank Capital ◽  
The Relationship

The bank capital structure debacle in the aftermath of the 2007-2009 financial crises continues to preoccupy the minds of regulators and scholars alike. In this paper we investigate the relationship between capital structure and profitability within the context of an emerging market of South Africa. We conduct multiple linear regressions on time series data of big South African banks for the period 2002 to 2013. We establish a strong relationship between the ROA (profitability measure) and the bank specific determinants of capital structure, namely capital adequacy, size, deposits and credit risk. The relationship exhibits sensitivity to macro-economic shocks (such as recessions), in the case of credit risk and capital but is persistent for the other determinants of capital structure.

scholarly journals The impact of operating leverage on the capital structure of Johannesburg Stock Exchange-listed firms before and after the 2008 global financial crisis

2018 ◽  
Vol 11 (1) ◽  
Author(s):  
Matabane T. Mohohlo ◽  
Johan H. Hall
Keyword(s):  
Financial Crisis ◽  
Capital Structure ◽  
South African ◽  
Global Financial Crisis ◽  
Stock Exchange ◽  
Johannesburg Stock Exchange ◽  
The Global Financial Crisis ◽  
Operating Leverage ◽  
The Impact ◽  
The Capital Structure

The financial leverage-operating leverage trade-off hypothesis states that as financial leverage increases, management of firms will seek to reduce the exposure to operating leverage in an attempt to balance the overall risk profile of a firm. It is the objective of this study to test this hypothesis and ascertain whether operating leverage can indeed be added to the list of factors that determine the capital structure of South African firms. Forty-six firms listed on the Johannesburg Stock Exchange between 1994 and 2015 are analysed and the impact of operating leverage is determined. The results are split into two periods, that is, the period before the global financial crisis (1994–2007) and after the global financial crisis (2008–2015). The impact of operating leverage during these two periods is then compared to determine whether a change in the impact of operating leverage on the capital structure can be observed especially following the crisis. The results show that the conservative nature of South African firms leading up to 2008 persisted even after the global financial crisis. At an industry level, the results reveal that operating leverage does not have a noticeable impact on capital structure with the exception of firms in the industrials sector of the South African economy.

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