The correct measure and definition of liquidity in finance literature remains an unresolved empirical issue. The main objective of the present study was to develop, validate and test the liquidity mismatch index (LMI) developed by Brunnermeier, Krishnamurthy and Gorton (2012) empirically. Building on the work of these prior studies, the study undertook to develop a measure of liquidity that integrates both market liquidity and funding liquidity within a context of asset liability management. Liquidity mismatch indices were developed and then tested empirically to validate them by regressing them against the known determinants of liquidity. Furthermore, the study investigated the nexus between liquidity and profitability. The unit of analysis was a panel of 12 South African banks over the period 2005–2015. The study developed two liquidity measures – the bank liquidity mismatch index (BLMI) and the aggregate liquidity mismatch index (ALMI) – whose performances were compared to and contrasted with the Basel III liquidity measures and traditional liquidity measures using a generalised method of moments (GMM) model. Overall, the two constructed liquidity indices performed better than other liquidity measures. Significantly, the ALMI provided a better macro-prudential liquidity measure that can be utilised in dynamic stochastic general equilibrium (DSGE) models, thus presenting a major contribution to the body of knowledge. Unlike the LMI, the BLMI and ALMI can be used to evaluate the liquidity of a given bank under liquidity stress events, which are scaled by theoretically motivated and empirically supported liquidity weights. The constructed BLMI contains information regarding the liquidity risk within the context of asset liability mismatches, and the measure used comprehensive data from bank balance sheets and from financial market measures. The newly developed liquidity measures are based on portfolio management theory as they account for the significance of liquidity spirals. Empirical results show that banks increase their liquidity buffers during times of turmoil as both BLMI and ALMI improved during the period 2007–2009. Subsequently, the improvement in economic performance resulted in a rise in ALMI but a decrease in BLMI. We found no evidence to support the theory that banks, which heavily depend on external funding, end up in serious liquidity problems. The findings imply that any policy implemented with the intention of increasing bank capital is good for bank liquidity since the financial fragility–crowding-out hypothesis is outweighed by the risk absorption hypothesis because the relationship between capital and bank liquidity is positive. / Finance, Risk Management and Banking / D. Phil. (Management Studies)

This study investigated the critical success factors that affect the effectiveness and efficiency of mergers and acquisitions, by soliciting responses from bank Chief Executives and case evidence from the South African banking industry for the period 1990 to 2015. The study applied a mixed-use methodology. The case study evidence was drawn from the formation of the “Big Four Banks” in South Africa, namely, Absa (“Barclays Africa Group”), First Rand Group, Nedbank Group and Standard Bank Group. The study found that when visions and values of merging banks were aligned, there was a greater chance of success. The study further found that culture compatibility of merging entities is paramount. Stakeholder acceptance was also found to have a strong impact on the chance of success or failure in mergers and acquisitions (M&A). The case evidence corroborated and substantiated that there was a positive Deal Value Added (DVA) trend before the merger activity and immediately thereafter, evidenced by positive share price appreciation resulting in increased market capitalisation. The quantitative results found that 56% of the sampled CEOs indicated that an 80% majority of bank mergers in the South African banking sector had created value over the long term, evidenced by 10-year return trends. This study contributes to the corpus of knowledge by generating an integrated assessment framework that can be applied even beyond the South African environment, by practitioners involved in mergers and acquisition activities. / Graduate SBL / D.B.L.

This study examined the determinants of commercial bank liquidity in South Africa. The panel regression approach was used, applying panel data from twelve commercial banks over the period 2006 to 2016. A quantitative research method was used to investigate the relationship between bank liquidity and some microeconomic and bank-specific factors and between bank liquidity and selected macro-economic factors. The regression analysis for four liquidity ratios was conducted using the pooled ordinary least squares regression, fixed effects, random effects and the generalised methods of moments. However, the system generalised methods of moments approach was preferred over the other methods because it eliminated the problem of endogeneity. Results show that capital adequacy, size and gross domestic product have a positive and significant effect on liquidity. Loan growth and non-performing loans had a negative and significant effect on liquidity. Inflation had both a positive and a negative but an insignificant effect on liquidity. The study concluded that South African banks could enhance their liquidity positions by tightening their loan-underwriting criteria and credit policies. Banks should improve their credit risk management frameworks to be more prudent in their lending practices to improve the quality of the loan book to enhance liquidity. They also need to grow their capital levels by embarking on efficient revenue enhancements activities. Banks may also to look at their clients on an overall basis and not on transaction bases, and they need to improve non-interest revenue by introducing innovated products. The South African Reserve Bank could push for policies that might enhance capitalisation by ensuring that the sector is consolidated and thus merging smaller banks to create banks with stronger balance sheets and stronger capital base. This study contributes to the empirical research repository on the determinants of liquidity and more specifically, it identified the significant factors that affect South African commercial bank liquidity. Identifying the determinants of South African commercial bank liquidity will provide the South African Reserve Bank with insight into ways of enhancing liquidity management reforms, to improve the sector’s liquidity management practices and help to maintain a sound and liquid banking sector. / Business Management / M. Com. (Business Management)

The analysis of bank account statements to establish evidence of illicit financial activity is an established financial investigation methodology in countries such as the United States and the United Kingdom, but it is still in its infancy in South Africa. This is further highlighted by virtue of the fact that no uniform analysis methodology is used in South Africa for the analysis of bank account statements. The purpose of the research was to explore the role of such analysis, and the current practises in South Africa and New Jersey in the United States. This was to determine a practical model for the analysis of bank account statements in the South African context. Empirical research led to a proposed process model for such analysis, which was synthesised from current practises in South Africa and New Jersey in the United States. This model is proposed as the basis for the development of a uniform analysis methodology for the examination of bank account statements. / Die analise van bankrekeningstate om bewys van onwettige finasiële aktiwiteite te bepaal is 'n vasgestelde finansiële ondersoek metode in lande soos die Verenigde State en die Verenigde Koningkryk, maar in Suid-Afrika is dit steeds in die begin stadium. Dit is verder beklemtoon deur die feit dat daar geen eenvormige analise metode in Suid-Afrika in gebruik is vir die analise van bankrekeningstate. Die doel van die navorsing was om die rol van hierdie tipe analise, en die huidige praktyk in Suid-Afrika en New Jersey in die Verenigde State te bepaal. Dit was om 'n praktiese model vir die analise van bankrekeningstate in Suid-Afrika te bepaal. Empiriese navorsing het gelui tot 'n voorgestelde proses model vir hierdie tipe analise, wat 'n samesmelting van die huidige Suid-Afrikaanse en New Jersey in die Verenigde State praktyk is. Hierdie model word voorgestel as die beginpunt vir die ontwikkeling van 'n eenvormige analise metode vir die ondersoek van bankrekening state. / Criminology and Security Science / M.Tech. (Forensic Investigation)

The debate concerning small firm access to finance continues. The proliferation of research of the issue underlines the importance attached in promoting a strong entrepreneurial culture within a country. Small firms are significant to economic growth if they are growing. Central to this significance is ascertaining the role of finance and in particular bank finance in accelerating small growth potential. The case study, through its ontological, epistemological and methodological position, draws on a document review and interview material from small firm owners and key informants to explore the role of bank finance in small firm growth. Case study evidence reveals that small firm owners do not intend to finance firm growth with bank finance but prefer to finance growth with internally generated funds. The owners indicate that non-financial and behavioural factors, such as, maintaining decision-making control, experience accessing bank finance, the perception of the banking relationship and growth aspirations of owners may be more important in dertermining the finance structure for firm growth. From the bank's perspective, findings suggest that risk assessment, financial viability of the enterprise and provision of collateral are more important in the lending decisions; findings supported by an analysis of selected documents. The small sample of small firm owners, bank representatives, experts and documents makes it difficult to generalize the findings. However, the findings are significant because exploring the issue from different perspectives presents invaluable insights, which can be investigated further to assist small firm owners, to develop finance products geared for small firm operations, and in the development of the knowledge base on finance-related issues in the South African context.

M.Comm. (Financial Management) / There is a wide perception that bank net interest margins (NIMs) in Sub-Saharan Africa in general and South Africa in particular, are higher compared to other regions. The study investigates four commercial banks in South Africa with the aim of identifying the relevant factors affecting the behaviour of NIMs in commercial banking in South Africa, and draws comparisons with other markets. The study employs the Classical Linear Regression Model (CLRM) using the Ordinary Least Squares (OLS) data estimating technique to analyse net interest margins over the period 2000 to 2010. The study takes note of Ho and Saunders’s seminal work produced in 1981, and subsequent extensions and modification by other authors and researchers. Net interest margins are modeled in a single-step together with explanatory variables driven from the theoretical model. Using data obtained from the Bankscope data base, the variables examined in the study are; competitive structure of the market, average operating costs, management’s propensity for risk aversion, credit risk exposure, the quantum of the bank’s operations, short-term money market interest rate volatility, the opportunity cost of holding reserves and quality of management running the institution. The findings of the study suggest that market power, average operating costs, degree of risk aversion, credit risk exposure, and size of operations are major factors explaining the behaviour of NIMs in South Africa. These variables are major in terms of the number of banks that exhibit statistical significance. Market power, interest rate volatility and opportunity cost of holding reserves are also relevant factors, although they affect fewer banks than the major factors. Comparison of South African net interest margins determinants with those from other regions reveals some fundamental differences. These differences indicate that banks from different countries and regions are faced with different operating environments and risk profiles that drive net interest margins.

This thesis presents a theoretical analysis of developments in the South African monetary banking sector and money market. In the first section, evolution of the political, social and economic environments over the past few decades are discussed to provide the reader with an idea of some factors responsible for the underdeveloped nature of this market. It has been argued that the domestic political and economic landscape is relatively stable. Nevertheless, factors such as Zimbabwe’s political and ensuing economic turmoil, coupled with numerous financial crises in other developing nations have had negative consequences on domestic financial market development and economic growth. The current state of monetary policy is also analysed, within the economic environment, and various policy considerations have been put forth concerning the inflation targeting policy. The thesis then goes on to scrutinise the statutory and institutional environments within which the monetary banking institutions operate. Recent changes in the regulations governing the operations of these institutions are identified, together with the consequences of such laws on banking institutions and possible amendments have been suggested. In particular, a system of Asset Based Reserve Requirements (ABRR) has been recommended, in place of the current cash reserve requirement, to ensure regulators create a level playing field in the financial sector. The system can also provide authorities with the necessary control required to direct funds to the most desirable sectors of the economy. Development of the interbank market and the effect of reduced banking competition on the efficacy of the South African Reserve Bank’s refinancing operations and inflation targeting policy are also considered. Finally, the thesis analyses some effects of financial development on the South African economy, and whether it is in the best interests of the country to pursue financial reforms with such vigour. While financial development may bring South Africa closer to international standards of best practice, the timing and extent of the reforms will be critical to guarantee success.

In many industries, service is the critical determinant of success or failure. Service failure is almost inevitable, and this has the potential for the organisation to lose its customer. However, if implemented successfully, Service Recovery can rectify the breakdown in service, and turn angry, frustrated customers into loyal ones. Service Recovery is vital for profitability, especially for companies operating in the services market, like First National Bank (FNB). Unfortunately, few service firms know how satisfied customers are with their Service Recovery efforts, and FNB is no exception. This study attempted to rectify the situation, to ensure that the bank does not fail its customers a second time. The major focus of the study is to assess client satisfaction with Service Recovery (SR) from FNB. By using the RECOVSAT instrument (developed by Boshoff in 1999), the study aims to establish how effective FNB was in terms of the six dimensions of SR, namely communication, empowerment, feedback, atonement, explanation, and tangibles. The relationship between each of the dimensions and customer satisfaction, as well as between customer satisfaction and loyalty, was measured, and a hypothesis for each relationship rejected or accepted. The empirical results show that, from 702 complainants, a RECOVSAT score of 68% was computed, which could be regarded as only satisfactory. The dimensions of communication, explanation, atonement, and empowerment, had the strongest positive correlation with customer satisfaction, while feedback and tangibles, although positively correlated, were not statistically significant, and thus not as important as the first four dimensions. FNB performed best on tangibles (81%), then communication (75%), explanation (70%), atonement (68%), empowerment (62%), and lastly feedback (51%). The study reinforced the view that customer satisfaction is positively related to loyalty. Other findings were that, administration and errors were the most frequent complaints, followed by pricing, fees, and interest, while time delays/waiting were the third most numerous. Over 54% of complainants had been with the bank for over 10 years, which could be a problem if the customers had left the bank, as the profitability of a customer generally increases with time. Age and gender did not appear to be factors that influenced behaviour of complainants. In terms of the managerial implications, it is recommended that FNB implement a Customer-Complaint-Handling (CCH) system that is both national and inter-group. The bank should also focus on empowering employees, improving communication skills, explaining to customers why the problem occurred, apologising, and offering some atonement. By adopting the recommendations, FNB should improve their service recovery, and as a consequence, their customer satisfaction and loyalty, and profitability should also increase.

This study examines the nature of the relationship which exists between mining sector production and development of the financial systems in South Africa. This is particularly important in that the mining sector is considered to be one of the major contributors to the country’s overall economic growth. South Africa is also considered to have a very well developed financial system, to the point where the dominance of one over the other is difficult to identify. Therefore offering insight into the nature of this relationship will assist policy makers in identifying the most effective policies in order to ensure that the developments within the financial systems impact appropriately on the mining sector, and ultimately on the economy. In addition to using the conventional proxies of financial system development, this study utilises the principal component analysis (PCA) to construct an index for the entire financial system. The multivariate cointegration approach as proposed by Johansen (1988) and Johansen and Juselius (1990) was then used to estimate the relationship between the development of the financial systems and the mining sector production for the period 1988-2008. The study reveals mixed results for different measures of financial system development. Those involving the banking system show that a negative relationship exists between total mining production and total credit extended to the private sector, while liquid liabilities has a positive relationship. Similarly, with the stock market system, mixed results are also obtained which reveal a negative relationship between total mining production and stock market capitalisation, while a positive relationship is found with secondary market turnover. Of all the financial system variables, only that of stock market capitalisation was found to be significant. The result with the financial development index reveals that a significant negative relationship exists between financial system development and total mining sector production. Results on the other variables controlled in the estimation show that positive and significant relationships exist between total mining production and both nominal exchange rate and political stability respectively. Increased mining production therefore takes place in periods of appreciating exchange rates, and similarly in the post-apartheid era. On the other hand, negative relationships were found for both trade openness and inflation control variables. The impulse response and variance decomposition analyses showed that total mining production explains the largest amount of shocks within itself. Overall, the study reveals that the mining sector might not have benefited much from the development in the South African financial system.

This research investigates the relationship between innovation and leadership in First National Bank in South Africa. In an information age paradigm, innovation is a key driver of organisational success. Innovation allows an information age company to create a sustainable competitive advantage over its competitors. First National Bank (FNB) has recognised the need for innovation and measures the amount of innovation generated in each business unit on an annual basis. Leadership is a key factor influencing innovation in large, multi-segment organisations, particularly transformational leadership. Large multi-segment organisations often have multi-functional teams and transformational leadership of these teams more effectively promotes innovation. Large multi-segment organisations also often have complex decision making processes. Transformational leadership ensures optimal innovative decisions rather than adequate decisions are reached. FNB is a multi-segment organisation comprising ten business units each headed by a Chief Executive Officer (CEO). The relationship between the level of innovation being generated annually by each business unit and the leadership style of the business unit CEO formed the focus of this research. The Multifactor Leadership Questionnaire was used to gather information on the leadership style of each CEO's. Data on the level of innovation within each of these business units was supplied by First National Bank. Data was statistically analysed against the innovation generated by each business unit using correlation analysis. Most of the results testing the relationship between transformational and transactional leadership and innovation were found not to be significant. This contradicts the theory which suggests a positive relationship between transformational leadership and innovation.