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 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.

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

scholarly journals Declining labour share of income in South Africa: the Kalman filter approach

2015 ◽  
Vol 8 (2) ◽  
pp. 372-391
Author(s):  
Irrshad Kaseeram ◽  
Darma Mahadea
Keyword(s):  
Kalman Filter ◽  
Labour Market ◽  
South African ◽  
Emerging Market ◽  
National Income ◽  
Absorption Capacity ◽  
Relative Distribution ◽  
The South ◽  
Labour Share ◽  
Long Run

Recent research has shown that in both developed and emerging market economies, the labour share of national income has exhibited a declining trend since the 1980s. Research investigating the problem of high unemployment in the South African economy has inferred that this problem arises partly because of past and current socio-political conditions, low rates of economic growth, labour market rigidities, globalisation and institutional arrangements. As the labour absorption capacity is rather low, many people are unable to earn an income from an engagement in the formal labour market. This is likely to have implications for the relative distribution share of labour and capital in the country’s national income. However, no recent published research has investigated this phenomenon in the South African context. Thus, this paper attempts to shed some light on the problem. Using yearly data from 1946 to 2013, the study employs the Kalman filter methodology within the standard Cobb-Douglas production function framework to investigate how labour and capital shares as well as total factor productivity have been behaving in this period. The results indicate that the share of total income going to labour has decreased over the long run, while that of capital has increased. Specifically, the share of capital increased from 3.1% in 1980 to 12% in 2013, while that of labour decreased from 91% to 83%. This reflects a rising income inequality and concentration of wealth, with output and income generation shifting to technological- or capital -intensive production requiring more skilled labour, a trend also observed in certain other countries.

scholarly journals PENGARUH DETERMINAN STRUKTUR MODAL TERHADAP NILAI PERUSAHAAN (Studi Kasus Pada Perusahaan Properti Di Bursa Efek Indonesia)

2014 ◽  
Vol 2 (2) ◽  
Author(s):  
Murtianingsih .
Keyword(s):  
Capital Structure ◽  
Firm Size ◽  
Cost Of Capital ◽  
Size Structure ◽  
Stock Exchange ◽  
Business Risk ◽  
Growth Opportunity ◽  
Property Companies ◽  
Equity Ratio ◽  
The Cost

MurtianingsihProgram Pascasarjana Magister Manajemen UMME-mail:[email protected] research was to know the effect of profitability, firm size, liquidity, structure asset, businessrisk, and cost of capital to capital structure at property simultaneously listed on IndonesiaStock Exchange and to know the variable which have partial effect to the capital structure.The research was taken place at Indonesia Stock Exchange Economics Faculty ofMuhammadiyah University Malang. Respondent are 21 property companies listed in IndonesiaStock Exchange. Purposive sampling was used to determine companies during five-years.Secondary data was taken between the year of 2006 up to 2010. Multiple regression analysisused to know the effect of profitability, firm size, liquidity, structure asset, business risk, andcost of capital to capital structure with 5 % of significance. The result of simultaneously regression(F test) exemplify that the variable profitability, firm size, structure asset, growthopportunity, liquidity, the cost of capital, business risk had significant effects to the capitalstructure of 21 property companies listed in Indonesia Stock Exchange. While the test of partialregression (t test), for the variable of profitability, growth opportunity, liquidity, cost ofcapital had effects to capital structure of property companies listed in Indonesia Stock Exchange,except the firm size, business risk, structure asset have no significant effects to thecapital structure of the property companies.Keyword: Debt to equity ratio, company size, profitability, growth, business risk and asset structure,cost of capital, liquidity

scholarly journals Capital budgeting practices: an empirical study of listed small en medium enterprises

2016 ◽  
Vol 13 (3) ◽  
pp. 199-208 ◽  
Author(s):  
John H. Hall ◽  
Thabani Sibanda
Keyword(s):  
Empirical Study ◽  
South African ◽  
Cash Flow ◽  
Capital Budgeting ◽  
Listed Companies ◽  
Discounted Cash Flow ◽  
Medium Enterprises ◽  
Flow Techniques

There have been many studies on the capital budgeting practices of large listed companies, but relatively little research has been undertaken on the capital budgeting practices of small listed companies. The main purpose of this study was therefore to analyse the capital budgeting practices of small and medium South African listed companies and to compare their capital budgeting practices to the capital budgeting practices of large listed companies. The results of the study indicate that the primary capital budgeting techniques employed by small listed companies are based on the IRR and the NPV, resembling the practices used by larger companies. Furthermore, the use of discounted cash flow techniques amongst small listed companies had increased over the last decade.

scholarly journals Financial crisis and capital structure: perspectives from an emerging market economy

2013 ◽  
Vol 11 (4) ◽  
pp. 789-799
Author(s):  
Annalien de Vries
Keyword(s):  
South Africa ◽  
Panel Data ◽  
Financial Crisis ◽  
Capital Structure ◽  
South African ◽  
Market Economy ◽  
Emerging Market ◽  
Negative Effects ◽  
Global Recession ◽  
The Capital Structure

World economies experienced one of the worst recessions in recorded history in 2008. South Africa, as an emerging economy, did not escape the negative effects of the global recession, and, as a result, experienced its first recession in almost two decades. During a recession, firms may need to adjust their capital structure in response to the adverse circumstances. The purpose of this study was to investigate the effect of the South African recession on the capital structure of firms listed on the Johannesburg Securities Exchange (JSE). Panel data methodology was used for this study. The results indicate that the 2008-2009 South African recession did have a significant impact on the capital structure of South African firms and that financial managers actively managed their capital structure to adapt to the new environment and circumstances they were exposed to

A Study on the Relationship between Capital Structure and Profitability Based on the Empirical Data of Listed Companies in Cultural Media Industry in China

2014 ◽  
Vol 926-930 ◽  
pp. 3735-3740
Author(s):  
Xu Zhong ◽  
Xiao Zhong Song ◽  
Ying Ying Xie
Keyword(s):  
Principal Component Analysis ◽  
Capital Structure ◽  
Principal Component ◽  
Listed Companies ◽  
Media Industry ◽  
Regression Methods ◽  
Equity Ratio ◽  
The Subject ◽  
The Relationship ◽  
Cultural Media

This paper chooses the listed companies in cultural media industry as the subject, selects 23 listed companies as the sample, utilizes the finical data during the period of 2002 and 2011 and employs the principal component analysis and linear regression methods to carry on an empirical research on the relationship between capital structure and profitability of the listed companies in cultural media industry. The research results show that the asset-liability ratio and profitability have significantly negative correlated relationship, and shareholders equity ratio has significantly positive correlated relationship with profitability, however, the relationship between liquidity ratios and profitability is not significant. Therefore, optimizing the capital structure can be recognized as an important way to improve the capability of listed companies in cultural media industry.

scholarly journals Corporate Finance Practices in India: A Survey

2002 ◽  
Vol 27 (4) ◽  
pp. 29-56 ◽  
Author(s):  
Manoj Anand
Keyword(s):  
Capital Structure ◽  
Corporate Finance ◽  
Firm Size ◽  
Dividend Policy ◽  
Cost Of Capital ◽  
Business Schools ◽  
Capital Budgeting ◽  
Firm Characteristics ◽  
Policy Decisions

The present study surveys 81 CFOs of India to find out about their corporate finance practices vis-a-vis capital budgeting decisions, cost of capital, capital structure, and dividend policy decisions. It analyses the responses by the firm characteristics like firm size, profitability, leverage, P/E ratio, CFO's education, and the sector. The analysis reveals that practitioners do use the basic corporate finance tools that the professional institutes and business schools have taught for years to a great extent. The study also reveals that the corporate finance practices vary with firm size.

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