This study investigates the capital structure practices of companies listed on the JSE by analysing their operating performance before and after significant leverage events defined as increases or decreases of more than 30% in a year. We develop a performance scorecard that acts as a complete synopsis of firm performance on aspects relating to leverage. We use a fixed effects regression on unbalanced panel data to test the relationship between the leverage change and 12 concurrent performance variables selected on the basis of their pre-established impact on firm leverage according to prior studies. We also test the relationship between the leverage change and the same set of performance variables five years before and five years after the event. We run a multiple discriminant analysis to test the predictive ability of our model. A 20% hold-out sample achieves a 48% correct classification rate.

To thrive, developing countries depend on high levels of protection being given to key industries such as manufacturing; specifically the automotive and textile industries. South Africa, as a developing country and especially under the emergence of globalisation, has followed suit in terms of developing policies and structures to protect certain critical industries. During an era (1980 to 1989) of high political instability, South Africa experienced isolation from the rest of the world, which resulted in declines in industrial revenues as well as the country’s automotive industry undergoing a stage of perilous stagnation. It was through a protection regime that the automotive industry realised growth, a regime which started slowly in 1989 and accelerated in 1995 with the introduction of the Motor Industry Development Programme (MIDP) (Black, 2001). Through this regime the South African government sought to integrate the South African automotive industry into the global market by improving the competitiveness of this industry (The DTI, 2010). This led to the automotive industry becoming one of the most successful export sectors in South African manufacturing and a large net consumer of foreign currency, totalling R20 billion and R10 billion in imports and exports respectively by 1998 (Damoense and Simon, 2004). Reviews of the government legislation called the MIDP were held in year 1999 and 2002 and in 2008, a successor to the MIDP was named, the Automotive Production Development Programme (APDP) and is set to commence in year 2013 until 2020. Unlike its predecessor, the APDP policy promises to bring greater and more inclusive benefits to the automotive industry as a whole, provided organisations have prepared well to receive it. This study investigated whether organisations have prepared for the upcoming 2013 - 2020 APDP, with specific reference to capital investment in equipment. It determined whether automotive organisations have spent and are going to spend resources in securing equipment and technology in preparation for the introduction of the APDP.

The major concern of investment decision-makers is to find the appropriate capital budgeting techniques to apply. Many factors cause change within an organisation. Strategic investment management takes a close look at these changing factors. To this end, a literature study of popular capital budgeting procedures, investment strategic theory, and a selected method for linking the two was undertaken. A sample of manufacturers in the Gauteng region of South Africa was chosen to indicate whether there is a correlation between financial theory and practice. The results of this survey indicated that financial evaluation was widely practised. Whereas, strategic analysis was used less often. The need for an in-depth study of other economic sectors and the financial theory and practice used by the investment decision-makers in those sectors is identified as a possible future study. The value inherent in the evaluation of relative performances of manufacturing firms, which have applied similar strategies, is also identified. / Business Management / M. Comm. (Business Management)

A research report submitted to the Wits Business School, University of the Witwatersrand, in partial fulfilment of the requirements for the degree of Master of Management in Finance and Investment, 2016 / This research investigated the application of capital budgeting and risk analysis techniques and their effect on company performance in the South African mining industry. Studies internationally and locally have reported an improved application of capital budgeting techniques— away from the naïve, non-discounted cash flow techniques of the Payback Period (PBP) to the more appropriate discounted cash flow methods of Net Present Value (NPV) and Internal Rate of Return (IRR). In a survey distributed to the Finance Managers, Officers and Directors of mining companies in South Africa, we confirmed the increased sophistication in capital budgeting— the results suggest that 83.3% prefer NPV, 61.5% always use IRR and only 58.3% use PBP. On the other hand, and in contrast to capital budgeting, risk analysis is still comparatively naïve; with sensitivity analysis being the dominant technique used in the mining industry. The sophisticated methods of scenario testing and real option analysis (ROV) are rarely employed. An empirical analysis on the effects of capital budgeting and risk analysis on company performance has yielded results in contradiction with the theory of capital budgeting. The finding of the study is a negative and/or insignificant relation of capital budgeting and risk analysis sophistication to company performance as measured by return of assets (ROA). Although this finding is counterintuitive and contradicts theory, it is, however, consistent with international studies of this nature. / XL2018

The major concern of investment decision-makers is to find the appropriate capital budgeting techniques to apply. Many factors cause change within an organisation. Strategic investment management takes a close look at these changing factors. To this end, a literature study of popular capital budgeting procedures, investment strategic theory, and a selected method for linking the two was undertaken. A sample of manufacturers in the Gauteng region of South Africa was chosen to indicate whether there is a correlation between financial theory and practice. The results of this survey indicated that financial evaluation was widely practised. Whereas, strategic analysis was used less often. The need for an in-depth study of other economic sectors and the financial theory and practice used by the investment decision-makers in those sectors is identified as a possible future study. The value inherent in the evaluation of relative performances of manufacturing firms, which have applied similar strategies, is also identified. / Business Management / M. Comm. (Business Management)

This dissertation is based on the hypothesis that a third dimension, namely investment time horizon, can add value to the more conventional two-dimensional methodology of assessing the relative risk and return attributes of various assets and portfolios in order to enhance investment decisions. This study shows that time horizons should be considered in the investment decision making process and provides concrete evidence that a methodology that is not cognizant of investment time horizon is prone to extensive long-term opportunity cost risk. In addition to providing evidence of investment time horizon relevance, the study makes suggestions as to how time horizons could be incorporated into the risk return assessments of various asset classes and also presents a framework for the more holistic assessment of asset class properties while incorporating time horizons. / Business Management / Thesis (M. Com. (Business Management))

This dissertation is based on the hypothesis that a third dimension, namely investment time horizon, can add value to the more conventional two-dimensional methodology of assessing the relative risk and return attributes of various assets and portfolios in order to enhance investment decisions. This study shows that time horizons should be considered in the investment decision making process and provides concrete evidence that a methodology that is not cognizant of investment time horizon is prone to extensive long-term opportunity cost risk. In addition to providing evidence of investment time horizon relevance, the study makes suggestions as to how time horizons could be incorporated into the risk return assessments of various asset classes and also presents a framework for the more holistic assessment of asset class properties while incorporating time horizons. / Business Management / Thesis (M. Com. (Business Management))

Earnings in the South African and Zimbabwean mining industries have been severely impacted by these countries' socio-economic and political changes in the last decade. News reports and international research publications consistently rates Zimbabwe as a country with the highest political risks in the world. In South Africa (SA), the initial mining charter requiring 51% Black Economic Empowerment, was leaked to the press in 2002 before promulgation making international investors weary. The currency, the Rand (R) has strengthened from the US$ from R13.85 in 2002 to R 7.17 in 2007, significantly impacting on returns as investors to shift their portfolio to other sectors. The purpose of this research was to explore the implications of country risk and investor sentiment for Impala Platinum's valuation and provide strategy recommendations to improve its market rating whilst sustaining its competitive advantage as a platform for achieving its 2010 vision. In this study, a brief environmental scan of the mining industry was undertaken focusing on the platinum sector as well as a background review of the industry and a five year performance comparison between Impala and Anglo Platinum. It also reviewed corporate strategy literature as it relates to the research problem as well as theoretical models of investor sentiment and decision making processes. The specific research design was primarily exploratory in nature. The Implats valuation conundrum appears to be a phenomenon and the best way to achieve the main research objective was to identify any new ideas, preliminary explore some possible hypothesis and provide strategy recommendations to the board. The research adopted both quantitative and qualitative designs to focus on understanding the values, attitudes and perceptions of investors, which is interpretive and inductive in nature. A holistic case study was the specific vehicle used to conduct the research. The research population was made up of all investors in different regions of the world. Given that the study specifically related to the Implats valuation relative to Amplats, the sampling was tailored to their common investors. Data was collected using a questionnaire; the likert five scale was used to design the questionnaire. The following recommendations were made as a result of the research. Implats should implement measures to build its value chain and attempt to move to a cost quartile not easy to replicate without significant investment and time. In the short term Implats needs to continue improving on its fundamental values whilst crafting a take over defence strategy. It also needs to improve on its investor relations program to robustly communicate its political risk management strategy. / Thesis (MBA)-University of KwaZulu-Natal, 2006.

Organisations are spending a large sum of capital by investing on physical assets in order to improve productivity and gain competitive advantage. It has become imperative that business leadership turn their attention to the development, implementation and sustenance of physical assets management strategies in order to eliminate operational and reliability risk.

Thesis (MComm (Business Management))--University of Stellenbosch, 2010. / ENGLISH ABSTRACT: The objective of almost all firms should be to maximise the wealth of shareholders. To achieve this goal, firms should use an optimal combination of debt and equity, which will consequently result in the lowest weighted average cost of capital. Firms therefore need to determine their target capital structure. This will require firms to be aware of the various factors that can influence their decision-making regarding capital structure. The effects of firm characteristics and economic factors on capital structures have been researched in many countries. Various South African studies have been conducted on this topic; however, limited research was found where both the firm characteristics and economic factors were included in the same study. The majority of South African studies furthermore either focused on a specific industry on the Johannesburg Securities Exchange Limited (JSE) or their focus was predominantly on the theory of capital structure applied by South African firms. Most of the studies were also conducted for the period prior to the demise of apartheid in 1994. Six firm characteristics (profitability, asset structure, liquidity, business risk, growth and size) and three economic factors (interest rate, inflation and economic growth) were identified for this study. The primary objective was to determine the effect of firm characteristics and economic factors on the capital structure of South African listed industrial firms. External databases were used to obtain the data needed for statistical analysis. McGregor BFA (2008) was used to obtain the data required to calculate the measures for the firm characteristics. This database contains annual standardised financial statements for listed and delisted South African firms. INET-Bridge (2005), Statistica South Africa (2006) and the South African Reserve Bank (SARB) website were used to obtain data for the economic factors. The study was conducted for a period of 14 years, from 1995 to 2008. Focusing only on those firms that are listed at the end of the selected period would have exposed the study to a survivorship bias. The census for this study, therefore, included all firms listed on the industrial sector of the JSE, as well as those firms that delisted during the selected period. Firms had to provide financial data for at least five years in order to be included in this study. This requirement was incorporated since the data set contains cross-sectional and time-series dimensions. The final census included a total of 280 firms (170 listed firms and 110 delisted firms), providing 2 684 complete observations for the firm characteristics and 14 complete observations for the economic factors. The results from this study indicated that the growth of firms and the interest rate may be the most important firm characteristic and economic factor, respectively, to consider in financing decisions. The study furthermore indicated that differences exist between the results obtained for book value leverage and those obtained for market value leverage. An important observation is that the results are stronger when the performance of the variables in the preceding year is included. Not only are the R² values higher, but the independent variables also reported to be more significant when one-year lag variables are included. This may indicate that capital structure takes time to adjust. Differences between listed firms and delisted firms are also evident from the results. Lastly, it appears that the firms included in the study overall, lean more towards the pecking order theory than towards the trade-off theory. Based on these results, it appears that firm characteristics and economic factors do have an effect on capital structures of listed industrial firms in South Africa. Firms should, therefore, take these factors into consideration when making their optimal capital structure decisions. / AFRIKAANSE OPSOMMING: Dit behoort die doelwit van byna alle firmas te wees om die welvaart van aandeelhouers maksimaal te verhoog. Om hierdie doelwit te bereik, moet firmas 'n optimale kombinasie van geleende kapitaal en ekwiteit gebruik, wat gevolglik sal lei tot die laagste geweegde gemiddelde koste van kapitaal. Firmas moet dus hulle beoogde kapitaalstruktuur bepaal. Dit sal van firmas vereis word om bewus te wees van die verskillende faktore wat 'n invloed op hul kapitaalstruktuur-besluite kan hê. Die uitwerking van 'n firma se eienskappe en ekonomiese faktore op kapitaalstruktuur is al in baie lande nagevors. Verskeie Suid-Afrikaanse studies is in dié verband gedoen, maar daar is beperkte navorsing waar beide firma eienskappe en ekonomiese faktore in dieselfde studie ingesluit is. Die meerderheid Suid- Afrikaanse studies het gefokus op 'n spesifieke nywerheid op die Johannesburg Sekuriteite-beurs Beperk (JSE) of die hooffokus was op die teorie van kapitaalstruktuur soos deur Suid-Afrikaanse firmas toegepas. Die meeste van die studies is ook gedoen vir die tydperk voor die afskaffing van apartheid in 1994. Ses eienskappe van firmas (winsgewendheid, batestruktuur, likiditeit, sakerisiko, groei en grootte) en drie ekonomiese faktore (rentekoers, inflasie en ekonomiese groei) is vir die studie geïdentifiseer. Die primêre doelwit was om die uitwerking van firmas se eienskappe en ekonomiese faktore op kapitaalstrukture van genoteerde nywerheidsfirmas in Suid-Afrika te bepaal. Eksterne databasisse is gebruik om die data wat vir statistiese ontleding nodig was, te bekom. McGregor BFA (2008) is gebruik om die nodige data vir die berekening van die maatstawwe vir die firma se eienskappe te bekom. Hierdie databasis bevat jaarlikse, gestandaardiseerde finansiële state vir genoteerde en gedenoteerde Suid- Afrikaanse firmas. INET-Bridge (2005), Statistica South Africa (2006) en die Suid- Afrikaanse Reserwebank (SARB) se webtuiste is gebruik om die data vir die ekonomiese faktore te bekom. Die studie is uitgevoer vir 'n tydperk van 14 jaar, van 1995 tot 2008. Deur slegs op daardie firmas wat aan die einde van die navorsingstydperk genoteer was, te fokus sou die studie aan 'n oorlewingsydigheid blootstel. Die sensus vir die studie het, dus, genoteerde firmas op die nywerheidsektor van die JSE asook daardie firmas wat gedurende die geselekteerde tydperk gedenoteer is, ingesluit. Firmas moes finansiële data vir ten minste vyf jaar verskaf om by die studie ingesluit te word. Hierdie vereiste is gestel aangesien die datastel beide deursnee- en tydreeksdimensies bevat het. Die finale sensus het 'n totaal van 280 firmas (170 genoteerde firmas en 110 gedenoteerde firmas) ingesluit, waaruit 2 684 volledige waarnemings vir die firma se eienskappe en 14 volledige waarnemings vir die ekonomiese faktore gemaak kon word. Die resultate van hierdie studie dui moontlik daarop dat die groei van firmas en die rentekoers, onderskeidelik die belangrikste eienskap van 'n firma en ekonomiese faktor is om te oorweeg by finansieringsbesluite. Die studie dui verder daarop dat die resultate, onderskeidelik verkry vir boekwaarde-hefboomwerking en markwaardehefboomwerking, verskil. 'n Belangrike opmerking is dat die resultate sterker is wanneer die prestasie van die veranderlikes in die voorafgaande jaar ingesluit word. Nie alleen is die R²-waardes hoër nie, maar die onafhanklike veranderlikes blyk ook om meer beduidend te wees wanneer een-jaar-vertraagde veranderlikes ingesluit word. Verskille tussen genoteerde firmas en gedenoteerde firmas is ook duidelik uit die resultate van die studie. Laastens wil dit blyk dat die firmas in die studie oor die algemeen meer leun na die pikorde-teorie ("pecking order theory") as na die kompromis-teorie ("trade-off theory"). Op grond van hierdie resultate wil dit voorkom asof 'n firma se eienskappe en die ekonomiese faktore wel 'n uitwerking het op die kapitaalstrukture van genoteerde nywerheidsfirmas in Suid-Afrika. Firmas moet dus hierdie faktore in ag neem wanneer hulle besluite neem rakende hul besluite oor optimale kapitaalstruktuur.