scholarly journals Big 4 auditing companies, earnings manipulation and earnings conservatism: evidence from an emerging market

2017 ◽  
Vol 14 (1) ◽  
pp. 35-45 ◽  
Author(s):  
Thabang Mokoaleli-Mokoteli ◽  
George Emmanuel Iatridis
Keyword(s):  
South Africa ◽  
Earnings Management ◽  
South African ◽  
Emerging Market ◽  
High Growth ◽  
Bad News ◽  
Earnings Manipulation ◽  
Corporate Failure ◽  
Big 4 ◽  
Governance Tools

This study focuses on South African listed companies and investigates the relation between Big 4 auditing companies, earnings management and earnings conservatism. It shows that companies audited by a Big 4 auditor leads to a more timely recognition of large losses and to lower levels of earnings manipulation and higher conditional conservatism. The findings report that the conditional form of conservatism is negatively related to unconditional conservatism. Higher conservatism is also reported for firms with high leverage and those that convey bad news. The opposite has been found for firms with high growth. The findings, in general support the notion that the new Companies’ Act in South Africa and the King III are effective corporate governance tools and the observed cases of corporate failure may be due to other factors, including management hubris.

Monitoring earnings management in emerging markets

2015 ◽  
Vol 31 (2) ◽  
pp. 86-108 ◽  
Author(s):  
Manel Hessayri ◽  
Malek Saihi
Keyword(s):  
South Africa ◽  
Earnings Management ◽  
United Arab Emirates ◽  
Ownership Structure ◽  
Emerging Market ◽  
Listed Companies ◽  
The Philippines ◽  
Content Type ◽  
Ifrs Adoption ◽  
Emerging Market Countries

Purpose – The purpose of this paper is to examine whether International Financial Reporting Standards (IFRS) adoption complements corporate governance factors (e.g. ownership structure) in monitoring managers’ discretional behavior in an emerging market context. Design/methodology/approach – The paper relies on a sample of listed companies in the United Arab Emirates, Morocco, South Africa and the Philippines during an eight-year period on average (four years of pre-adoption period and four years of post-adoption period). Findings – The authors find no evidence of lower earnings management after the switch to IFRS reporting, suggesting that managerial discretional behavior is insensitive to a firm’s IFRS adoption. However, the authors document effective monitoring role of a firm’s ownership structure on earnings management. More interestingly, institutional investors are effective in constraining earnings management when holding a high level of ownership. Moreover, the effect of blockholders and institutional blockholders varies as their ownership rises following a non-linear pattern. Research limitations/implications – First, the assumption that discretionary accruals are adequate measure of earnings management may be criticized in different ways. Second, the findings, performed on listed companies in the United Arab Emirates, Morocco, South Africa and the Philippines, should be interpreted with caution and cannot be generalized to all emerging market countries. Practical implications – Standards setters and market authorities should be aware of earnings management determinants to set adequate and fitting accounting standards limiting opportunistic behavior of managers and mainly to set up training programs to accounting professionals improving the IFRS implementation. Moreover, considering specific features of firms in emerging market countries related to ownership structure, international investors may rely on such criteria to evaluate firms. Finally, auditors should be aware of different incentives for earnings management in order to be able to detect eventual manipulation of accounting earnings. Originality/value – This paper provides a timely contribution to the continuous debate of the effect of IFRS adoption on earnings management in a poorly exploited setting, emerging market context. When investigating, additionally, the eventual non-linear effect of institutional ownership, block ownership, institutional block ownership and non-institutional block ownership on earnings management, a major contribution is that it brings to light the finding of a differential influence of ownership levels on earnings management.

scholarly journals The underwriting process of engineering insurance in South Africa

2014 ◽  
Vol 4 (1) ◽  
pp. 38-45
Author(s):  
D K Murphy ◽  
Frederik J. Mostert ◽  
Jan Hendrik Mostert
Keyword(s):  
South Africa ◽  
South African ◽  
Emerging Market ◽  
Secondary Data ◽  
Primary Data ◽  
Opinion Survey ◽  
Short Term ◽  
Different Types ◽  
Financial Decision ◽  
Engineering Insurance

Engineering insurance covers damage to plant, machinery and other engineering equipment such as boilers, computers, cranes and lifts. The underwriting process of engineering insurance is therefore complex as different types of risks from a big variety of industries are involved. The underwriting process of engineering insurance often requires specialists such as engineers to identify and analyse the particular risks. The objective of this research paper focuses on the improvement of financial decision-making regarding the underwriting process of engineering insurance. Secondary as well as primary data were necessary to reach this objective. The secondary data addressed the underwriting process of engineering insurance as well as the underwriting factors which should be considered by the short-term insurers when they are underwriting engineering insurance. The empirical study embodied an opinion survey which included the top 10 South African short-term insurers which underwrite engineering insurance. As they are the market leaders in this country concerning engineering insurance, due attention was paid to obtain their perceptions regarding the importance of the underwriting factors of engineering insurance, the problem areas which the respondents encounter during the underwriting process, as well as how often the respondents need to adjust the policy stipulations to take the underwriting factors into account. As South Africa is a developing country and has an emerging market economy, the conclusions of this study should also be valuable to other countries which are classified similarly.

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

The Extent to Which Professional Advice Can Reduce the Disposition Effect: An Emerging Market Study

2018 ◽  
Vol 17 (2) ◽  
pp. 229-249
Author(s):  
James Bashall ◽  
Gizelle D. Willows ◽  
Darron West
Keyword(s):  
South Africa ◽  
South African ◽  
Emerging Market ◽  
Jel Classification ◽  
Disposition Effect ◽  
Individual Investors ◽  
Professional Advice ◽  
Portfolio Rebalancing ◽  
History Of

This study tests for the disposition effect in South Africa across two classes of non-professional investors: those acting in their own capacity and those acting with the assistance of professional investment advisors. The trade history of 4,840 investor accounts from a South African stockbroker was analysed over the 5-year period from October 2008 to October 2013. The results showed that individual investors in South Africa exhibit the disposition effect. However, investors acting with the assistance of professional advisors show the effect to a lesser extent which was found to be rationally justifiable on the grounds of portfolio rebalancing. JEL Classification: G11, G14, G40, G41

scholarly journals Meeting Dividend Thresholds Through Earnings Management of Listed Companies in South Africa

2020 ◽  
pp. 77-95
Author(s):  
Xin Yao Li ◽  
Pei-Wen Chen
Keyword(s):  
South Africa ◽  
Earnings Management ◽  
Regression Model ◽  
Agency Theory ◽  
Prospect Theory ◽  
South African ◽  
Listed Companies ◽  
Study Data ◽  
Signal Theory ◽  
Dividend Distribution

Dividend distribution influences corporate operating decisions, and the prior year’s dividends represent an earnings threshold. The purpose of this study was to clarify perceptions regarding the manipulation of income toward a desired earnings goal (i.e., dividend threshold). In this study, data from 2011 to 2019 were collected from the S&P Capital IQ database. A regression model was adopted to analyze the manipulation of income toward a dividend threshold (i.e., desired earnings goal) among South Africa’s listed industry. Moreover, the behavior of managers of listed South African firms tended to meet or exceed dividend thresholds by manipulating earnings, which is consistent with signal theory, prospect theory and agency theory. Keywords: Dividend thresholds, Earnings management, South Africa, Signal theory, Prospect theory.

scholarly journals Reinsurance by short-term reinsurers in South Africa

2016 ◽  
Vol 6 (1) ◽  
pp. 35-42
Author(s):  
C L R Fernhout ◽  
Frederik J. Mostert ◽  
Jan Hendrik Mostert
Keyword(s):  
South Africa ◽  
South African ◽  
Emerging Market ◽  
Primary Study ◽  
Literature Study ◽  
Short Term ◽  
Financial Decision Making ◽  
Empirical Survey ◽  
Brics Countries ◽  
Financial Decision

The short-term reinsurance process usually involves three parties, namely the insurer, the reinsurer and the original policyholder, as the insurer cedes a part of the covered risk of the policyholder to the reinsurer. This research however addresses the perceptions of reinsurers regarding their reinsurance activities, where the reinsurer sells reinsurance to other insurance entities (viz. insurers and reinsurers), as well as buys reinsurance from other insurance entities. The crux of short-term reinsurance is therefore mutually loss sharing between the various insurance entities. The objective of this research focuses on the improvement of financial decision-making regarding the reinsurance operations of the reinsurers. To achieve this objective a literature study was undertaken to provide adequate background to compile a questionnaire for the empirical survey. The primary study embodies the perceptions of the South African short-term reinsurers regarding the following aspects: the various reasons why reinsurance occurs; the contracts / methods of reinsurance; the bases / forms of reinsurance; and the factors which determine the retention levels of a reinsurer. South Africa is classified as a developing economy, is a member of the BRICS countries and has an emerging market economy. The empirical results should therefore also be valuable to other countries which are classified similarly.

scholarly journals Trail Running: Exploring South Africa’s Serious Leisure Economy

2020 ◽  
pp. 1027-1043
Author(s):  
Liynsey McEwan ◽  
Tracey McKay ◽  
Melissa Baker
Keyword(s):  
South Africa ◽  
South African ◽  
Online Survey ◽  
Emerging Market ◽  
Leisure Activities ◽  
Serious Leisure ◽  
Theoretical Understanding ◽  
Self Image ◽  
Trail Running

A health-conscious mindset has grown rapidly among South African middle-class consumers. This can be seen by their embrace of sports watches, reward-based programmes, and participation in organised leisure activities such as cycling and running. Within this context, trail running is becoming increasingly popular; however, research on the nature of trail running in South Africa is limited. A theoretical understanding of the relationship that participants have with trail running, specifically the applicability of the serious leisure framework, could provide valuable insights into this emerging market. This study incorporated an exploratory case-study design. Quantitative data was collected using purposive sampling and an online survey to determine if trail runners undertook the activity as leisure careerists or not. The level of seriousness of respondents was measured using the six characteristics of serious leisure as defined in the Serious Leisure Inventory Measure (SLIM). The main findings were that many trail runners meet all six of the characteristics of serious leisure. ‘Perseverance’ and ‘Career’ followed by ‘Effort’ and ‘Identity’ were the most important factors to the trail runners. Motives of ‘Fun’ and ‘Sense of achievement’ were more important than ‘Fitness’ or ‘Social factors’, however. ‘Sense of achievement’ and ‘Social’ correlated the most strongly with respondents’ overall level of seriousness in the sport. Income impacted on motivations, however, with wealthier people more likely to report that they participated for Fun. In terms of gender, women were more likely to report that trail running boosted their self-image. In addition, trail running forms part of the serious leisure economy, as participants are prepared to spend substantial sums of money on related equipment and participation in events. This study provides valuable insights for marketing and design of trail-running events and contributes to the gap in the literature on serious leisure in South Africa.

Islamic Tourism in South Africa

2014 ◽  
pp. 585-599 ◽  
Author(s):  
M. Noor Davids
Keyword(s):  
South Africa ◽  
South African ◽  
Emerging Market ◽  
Critical Question ◽  
Significant Component ◽  
South African Society ◽  
Historical Presence ◽  
Economic Landscape ◽  
External Forces ◽  
Muslim Culture

New economic opportunities emerged during the post-apartheid period in South Africa. Tourism was one sector that presented untapped potential to its citizens and the global community. This sector became one of the key generators of economic activity, and “halal tourism,” also referred to as Islamic tourism, developed as part of this emerging market. Research in Islamic tourism is still in its infancy, but due to the historical presence of Muslims, Islamic culture has always been regarded as an integral part of the South African cultural heritage. Evidence that Islamic tourism is an emerging sector is the recently convened conference on “halal tourism” in South Africa. Islamic tourism cannot be understood without an appreciation of the history of Muslims in South Africa. Since their arrival as political exiles and slaves beginning in 1652, Muslims struggled against colonialism and oppression, and today, their vibrancy is visible in the cultural, social, and economic landscape of South African society. The critical question that informs this chapter is, What is the potential of Islamic tourism in South Africa? Through a theoretical lens, tourism is viewed from a postmodern perspective that critiques the dominant homogenous views of Islam and Muslims. While Muslim culture evolved over time, it changed into a hybrid of cultural and religious confluences shaped by internal and external forces. Muslim culture consequently forms a significant component of the national heritage and is an integral part of the tourism industry. This chapter locates the manifestation of Islam in the context of tourism, arguing for its viability as a significant component of an emerging global Islamic tourism market.

scholarly journals Liquidity management by South African banks

2012 ◽  
Vol 9 (3) ◽  
pp. 52-58
Author(s):  
Wessel Lourens Crafford ◽  
Frederik J. Mostert ◽  
Jan Hendrik Mostert
Keyword(s):  
South Africa ◽  
South African ◽  
Banking Industry ◽  
Emerging Market ◽  
Management Process ◽  
Literature Study ◽  
Liquidity Management ◽  
Financial Decision Making ◽  
Empirical Survey ◽  
Financial Decision

The management of liquidity is of prime importance to banks. This management process should be carefully planned and continuously managed to master a global and/or national financial crisis. The objective of this research paper embodies the improvement of financial decision-making by banks regarding the management of their liquidity. To achieve this objective, a literature study was initially done. An empirical survey followed thereafter, focusing on the 10 biggest banks in South Africa. They are the leaders of the South African banking industry, and as South Africa is a developing country with an emerging market economy, the conclusions of the study may also be valuable to banking industries of similar countries. The importance of the liquidity management factors, the problem areas surrounding this topic, as well as how often the requirements are adjusted to ensure proper and effective liquidity management are addressed.

scholarly journals Corporate life cycle and dividend payout: A panel data analysis of companies in an emerging market

2021 ◽  
Vol 14 (1) ◽  
Author(s):  
Ntungufhadzeni F. Munzhelele ◽  
Hendrik Wolmarans ◽  
John Hall
Keyword(s):  
South Africa ◽  
Life Cycle ◽  
Panel Data ◽  
Emerging Markets ◽  
South African ◽  
Emerging Market ◽  
Panel Data Analysis ◽  
Dynamic Panel Data ◽  
Dividend Payout ◽  
Life Cycle Hypothesis

Background: The dividend payout policy remains one of the key functional areas of corporate finance because it is through receipt of dividends that shareholders can share in the profits of their investments. Amongst the dividend payout theories that have been developed over the decades, the life-cycle hypothesis has received little attention in research.Aim: The aim of this study was to test the dividend life-cycle hypothesis in the South African contex.Motivation for the study: Justification for this study in the context of South Africa is that there is minimal research in this regard in emerging economies. South Africa presents a good platform for this research because it is amongst the highly regarded emerging markets and this has been confirmed by its representation in Brazil, Russia, India, China and South Africa (BRICS) countries. Hence, results in this regard would shed some light in the form of a relative representation of overall emerging markets trend.Research approach/design and method: A panel data of 119 Johannesburg Stock Exchange (JSE) listed sample companies were used to test the hypothesis during the period 2006–2015. A combination of basic and dynamic panel data estimators was used to analyse the data.Main findings: The study finds that the dividend life-cycle hypothesis is prevalent amongst South African companies. Specifically, it was observed that the considered companies pursuing growth projects paid less dividends. Furthermore, the growth companies have shown to be more aggressive in their pursuit for growth and hence are able to create more value for shareholders than value for companies.Managerial implications: Financial managers will be afforded with enhanced decision alternatives in respect of their fiduciary duties towards the shareholders in respect of maximising value.Conclusion: These results provide a mirror image of those of the developed markets and a good context for future research in the same area in an emerging economy setting.

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