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 financing behaviour of firms and financial crisis

2014 ◽  
Vol 40 (12) ◽  
pp. 1159-1174 ◽  
Author(s):  
Albert Danso ◽  
Samuel Adomako
Keyword(s):  
South Africa ◽  
Financial Crisis ◽  
Capital Structure ◽  
South African ◽  
The South ◽  
Firm Level ◽  
2008 Financial Crisis ◽  
Content Type ◽  
African Context ◽  
The Capital Structure

Purpose – The purpose of this paper is to contribute to the capital structure literature by examining the determinants of capital structure from the context of South Africa and to provide evidence of the effects of the 2007/2008 global financial crisis on firm-level determinants of debt-equity choice. Design/methodology/approach – This paper begins by embarking on an extensive review of literature on extant empirical research on capital structure. The panel econometric technique is further adopted to examine firm-level determinants of capital structure and also the impact of 2007/2008 financial crisis. Findings – The findings of the paper suggest that theories of capital structure underpinning debt-equity choice of firms in developed economies are also applicable in the South African context. The authors also find a strong evidence of the effects of the financial crisis on the capital structure of firms in South Africa. Practical implications – This paper serves as springboard on which further research can be grounded and also highlights the interaction between the South African economy and the global economy. Originality/value – The paper provides a fresh evidence on the determinants of capital structure from the Sub-Saharan African context and to the authors’ knowledge, this is the first paper that examines the effects of the 2007/2008 financial crisis on capital structure of firms in South Africa.

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.

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.

scholarly journals Capital structure of Brazilian public companies: normality, global financial crisis and economic recession

2018 ◽  
Vol 64 (1) ◽  
pp. 78
Author(s):  
Flavio Paulino Ramos Júnior ◽  
Isabela dos Santos ◽  
Luiz Eduardo Gaio ◽  
Nelson Oliveira Stefanelli ◽  
Ivan Carlin Passos
Keyword(s):  
Data Analysis ◽  
Panel Data ◽  
Financial Crisis ◽  
Capital Structure ◽  
Empirical Analysis ◽  
Global Financial Crisis ◽  
Economic Recession ◽  
Public Companies ◽  
Main Determinants ◽  
The Capital Structure

<p>This article aims to identify the determinants of the capital structure of Brazilian companies and compare it with financial theories. In addition, the normality periods (2007, 2009–2014) and financial crisis periods (2008 and 2015) will be considered in the analysis. The sample has 114 Brazilian public companies in the periods from 2007 to 2015. The methodology used for data analysis was multiple regression for panel data. The results showed that there are differences between the determinants of the capital structure in periods of crisis and of normality. Some of the hypotheses tested were accepted. These hypotheses relate financial theory to empirical analysis. Finally, the research contributed by demonstrating the main determinants of the capital structure in the analyzed periods, showing changes between such determinants.</p>

scholarly journals An empirical capital market rate function for an emerging market economy in international financial crisis

1999 ◽  
Vol 2 (3) ◽  
pp. 335-357
Author(s):  
Chris Harmse ◽  
Charlotte Du Toit
Keyword(s):  
South Africa ◽  
Financial Crisis ◽  
Interest Rates ◽  
South African ◽  
Emerging Market ◽  
Rate Function ◽  
Market Rate ◽  
International Financial Crisis ◽  
Long Run ◽  
Democratic Election

After the first democratic election in South Africa in April 1994, South Africa's financial markets became more exposed and vulnerable to international developments, vide the financial crisis of 1998. This vulnerability raises some important questions. Has its greater degree of openness led to a structural change in the South African economy? Are long-term interest rates now primarily determined by international sentiment regardless of domestic economic and political conditions, during periods of international financial market volatility? And, in the event, what is the consequent effect on monetary policy in South Africa? The aim of this paper is to investigate these questions by using a cointegration approach to estimate a long-run interest or bond rate function for South Africa.

Determinants Of Capital Structure For Multinational And Domestic Companies In India: Panel Data Regression Model

2019 ◽  
Vol 118 (7) ◽  
pp. 147-154
Author(s):  
K. Maheswari ◽  
Dr. J. Gayathri ◽  
Dr. M. Babu ◽  
Dr.G. Indhumathi
Keyword(s):  
Panel Data ◽  
Capital Structure ◽  
Regression Model ◽  
Business Risk ◽  
Return On Assets ◽  
Panel Data Regression ◽  
Data Regression ◽  
Return On Capital ◽  
Domestic Companies ◽  
The Capital Structure

The capital structure refers to the components of capital needed to establish and expand its business activities. The study was made with an objective to examine the determinants of capital structure of multinational and domestic companies listed in S&P BSE automobile sector. The study concluded that there is significant impact on capital structure determinants such as size, business risk, non debt shield tax, return on assets, tangibility, profit, return on capital employed and liquidity on the capital structure of multinational and domestic companies of Indian Automobile Sector.  

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 Determinants of the Capital Structure of Companies Listed on the Stock Exchanges of Argentina, Brazil and Chile: An Empirical Analysis of the Period from 2007 to 2016

2020 ◽  
Vol 12 (6) ◽  
pp. 18
Author(s):  
Marcelo Rabelo Henrique ◽  
Sandro Braz Silva ◽  
Antônio Saporito ◽  
Sérgio Roberto da Silva
Keyword(s):  
Panel Data ◽  
Capital Structure ◽  
Order Theory ◽  
Future Research ◽  
Stock Exchanges ◽  
Pecking Order ◽  
Pecking Order Theory ◽  
Speed Of Adjustment ◽  
Asset Growth ◽  
The Capital Structure

The present investigation refers to the determinants of the capital structure, using the technique of multiple regression through Panel Data of open capital companies in the stock exchanges of Argentina, Brazil and Chile, in order to know the behavior of determinants of the capital structure in relation to Trade-Off Theory (TOT) and Pecking Order Theory (POT). The POT offers the existence of a hierarchy in the use of sources of resources, while the TOT considers the existence of a target capital structure that would be pursued by the company. Sixteen accounting variables were used, in which five are dependent (related to indebtedness) and eleven are independent variables (explaining the determinants of the capital structure). It is observed that, with the use of the Panel Data, the determinants that seem to influence in a more accentuated way the levels of debt of the companies are: current liquidity, tangibility, return to shareholders, return of assets, sales growth, asset growth, market-to-book and business risk measured by the volatility of benefits. Suggestions for future research include the use of Panel Data to analyze other factors that may influence indebtedness, mainly taxes and dividends, as well as a deeper analysis of factors that may influence the speed of adjustment towards the supposed objective level.

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.

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