This thesis examines the different areas of agency theory including managerial discretion, corporate governance compliance, voluntary disclosure policies and regulation. The institutional setting for these studies will be the Alternative Investments Market (AIM) as this market provides a unique regulatory environment and distinctive corporate governance features that makes it suitable for analysis. Specifically, AIM, unlike its FCA-regulated main market counterpart, operates under a self-regulated environment, where application of the FCA rules and combined codes are voluntary. This allows great discretion in a firms operation leading to potential agency problems as mandatory disclosure is limited to price-sensitive information, allowing for the presence of information asymmetry. As well as agency theory, one of the main arcs of this thesis explores the role of Nomads. As principle regulator, these firms are charged with ensuring the compliance of their clients with the AIM rules, as well as ensuring the continued success of AIM itself. The first investigation creates a Nomad reputation index to test how the market responds when companies change to more reputable Nomads. To do this, event study methodology is utilised to examine the abnormal returns earned around Nomads switches. The key findings indicate that when managers switch-up to a more reputable Nomad, a proxy for managerial bonding, the market responds favourably, in spite of the costs associated with hiring a more reputable Nomad. Similarly, when managers make the unnecessary decision to switch to a Nomad of equal rank, the market responds negatively. As there is no intuitive advantage to switching to a Nomad of equal rank, it might therefore be seen as a costly and unnecessary move that will not improve the value of the firm. Therefore, the market reacts negatively, indicating the presence of market discipline as investors are punishing managers for making a decision perceived as unnecessary. The final analysis introduces the concept of ‘strict’ Nomads who are perceived to follow the AIM rules more closely than other Nomads. The reporting lag is used as a proxy and finds a positive relation with switches to a strict Nomad over a lenient one. The second study examines the determinant of corporate governance compliance with a focus on the effect of regulation. The findings document that regulation has not influenced the level of compliance, but rather there has been a convergence in governance standards over time given the increased awareness and demand for governance attributes. The findings also extend the Nomad reputation analysis with regards to governance and find a significant positive relation indicating Nomads influence governance standards as part of their monitoring role. The final study examines how the extent of voluntary disclosure is influenced by the company’s corporate governance attributes and the reputation of the Nomad. This study finds a positive relation between the level of voluntary disclosure, board independence and the presence of a nomination committee. Furthermore, this study reveals that voluntary earnings disclosure is a signal for bad news as the LS regression documents a negative relation between abnormal returns and the level of voluntary disclosure. This is corroborated in the event study where the announcement of a notification of results and the subsequent earnings announcement are associated with negative abnormal returns being earned.

Much has been written during the past decade to explain the relationship between financial and operating leverage and stock-price volatility. However, the relationship between combined leverage and stock-price volatility has yet to be fully explored. Mandelker and Rhee's (MR) recent study uses both operating and financial leverage in a regression (equivalent to the traditional total leverage—DTL) and shows that both types of leverage are positively associated with common stock betas. Huffman recently demonstrated that there are interactions between operating leverage and financial leverage. Therefore, MR's model could be oversimplified. This study examines the relationship between firms' combined leverage and their stock-price volatility. The study also examines industry and industry growth to see if the relationship is influenced by these factors. The question is whether DOCL is a better risk measure than DTL and whether there is an interaction between operating and financial leverage. The inferences that can be drawn from the study's results are as follows: (a) Stock risk is a function of combined leverage; (b) Industry significantly influences the relationship between stock risk and DOCL; (c) High growth increases the relationship between stock risk and DOCL; (d) Combined leverage (DOCL) is a better risk measure than total leverage (DTL). Further, the problem with the traditional total leverage measure is the omission of the interaction between DOL and DFL. This is consistent with Huffman's theory and suggests Mandelker and Rhee's model is oversimplified.

M.Com. (Business Management) / The capital structure of a company depends on the degree of debt used. Companies use debt to trade of tax shields and financial distress costs. At the margin where these equate, the optimal capital structure is reached. This optimal capital structure has been determined for each size of market capitalisation on the Johannesburg Securities Exchange. The capital structure theories of the static trade-off theory, pecking order and signalling model theory are highlighted in relation to company determinants such as size, asset structure, profitability and growth opportunities. A sample of 35 companies was used for each market capitalization for the period 2003 to 2009. The researcher uses a bar graph to display the average price to book value (P/BV) in sequential intervals for each degree of leverage in order to determine the optimal capital structure. The research shows that the optimum leverage for small market capitalisations was reached with a DIE ratio of 0.75-1 and for medium and large market capitalisations between 1.01-1.25.

This treatise examines the history of private equity as a context in which to understand its role in the economy and specifically, the background for the high profile leveraged buy-outs that have been entered into in the past year. The treatise then focuses specifically on the Brait-Shoprite buy-out, examining its structure and the tax implications. The treatise then reviews the reaction of the South African Revenue Authority (“SARS”) to the buy-out and evaluates whether it was the best approach that could have been taken under the circumstances. As a result of the research, the following conclusions have been reached: Private equity transactions Private equity transactions have a role to play in the business world despite the apprehensions of tax authorities. The perception that these transactions are tax driven as part of an avoidance scheme is not justified. Structure of the Shoprite buy-out transaction: The Shoprite buy-out transaction was structured to obtain deduction for interest. The transaction was also structured to utilise the relief provisions of Part II of Chapter II (Special Provisions Relating to Companies) of the Income Tax Act no.58 of 1962, as amended (“the Act”). The relief was for capital gains tax (“CGT”) on disposal of the Shoprite assets. Finally, the transaction was designed to allow the existing shareholders to exit their investments free of Secondary Tax on Companies (“STC”). The reaction of SARS to the Shoprite buy-out transaction Whereas SARS may have been justified in questioning the structure and its impact on fiscal revenue, the response in the form of withdrawing STC relief from amalgamation transactions in section 44 was not in the best interest of a stable tax system and the majority of tax payers who are not misusing or abusing loopholes in the income tax legislation. It may have been possible for SARS to attack the structure based on the General Anti-Avoidance Rule (GAAR) in part IIA of the Chapter III of the Act.

Small and medium enterprises (SMEs) are very important to employment creation, poverty alleviation and the sustainable economic development of a nation. Encouraging SMEs, especially start-ups is crucial for sustainable economic growth. However, the failure rate of start-up SMEs in South Africa is one of the highest in the world. In reviewing the literature of the causes of the failure of start-up SMEs, access to finance emerged as a prime challenge. Start-up SMEs find it very difficult to obtain external finance from commercial banks and venture capitalists. The national and provincial governments in South Africa have realised that access to finance is a major constraint to the growth and survival of start-up SMEs and have put in place certain measures to improve access to finance by start-up SMEs. One of the primary measures put in place by government to improve access to finance by start-up SMEs is the provision of Business Development Service by some government agencies. This research investigates the role of Business Development Services Providers (BDSs) in improving access to finance for start-up SMEs. Questions arise as to why the failure rate of start-up SMEs is high in South Africa despite all these government measures aimed at assisting start-ups to access finance. Empirical research was conducted to investigate the role of BDS in improving access to finance by start-up SMEs. The instrument used for data collection was the self-administered questionnaire. The statistical analyses included descriptive statistics, T-test, ANOVA, correlation and regression analysis. The Cronbach‟s alpha was used as a measure of reliability. The results of the study revealed that: Access to finance is still a major problem hindering the survival of start-up SMEs. There is a lack of awareness of BDS providers and their services by the majority of start-up SMEs. There is a significant positive relationship between the use of BDS by start-up SMEs and success in accessing finance. Start-up SMEs that are aware of BDS do make use of the services. The results suggest that BDS are important to improving access to finance by start-up SMEs. However, there is a need to build awareness and encourage the use of BDS by start-up SMEs to improve their access to finance and ultimately increase their chances of survival.

This thesis presents various dynamic models of corporate decisions to address two main issues: investment distortions caused by debt financing and cash flow sensitivities. In the first chapter, four measures of investment distortion are computed. First, the effect of financing frictions is examined. The tax benefit of debt induces firms to increase their debt capacity and to invest beyond the first-best level on average. The cost of this investment distortion outweighs the tax benefit of debt. Second, Myers's (1977) debt overhang problem is examined in a dynamic framework. Debt overhang obtains on average, but not in low technology states. Third, there is no debt overhang problem in all technology states when debt is optimally put in place prior to the investment decision. Finally, the cost of choosing investment after the debt policy is examined. Equity claimants lose value by choosing to invest after their debt is optimally put in place because they do not consider the interaction between their investment choice and the debt financing conditions. The second chapter explores the impact of financial constraints on firms' cash flow sensitivities. In contrast to Fazzari, Hubbard, and Petersen (1988), cash flow sensitivities are found to be larger, rather than smaller, for unconstrained firms than for constrained firms. Then, why is investment sensitive to cash flow? In the two models examined in the second chapter, the underlying source of investment opportunities is highly correlated with cash flows. Investment may be sensitive to cash flow fluctuations simply because cash flows proxy for investment opportunities. This leaves two important questions. Can this chapter suggest a better measure of investment opportunities than Tobin's Q? Not a single measure for both the unconstrained and constrained firm models. Can this chapter suggest an easily observable measure of financial constraint? Yes: large and volatile dividend-to-income ratios. / Business, Sauder School of / Graduate

The effect of a change in capital structure on the risk and return of common stockholders is investigated. Also, the information content of dividends when a firm goes for new outside financing is examined. Data used in the study are collected from the Moody's Bond Survey, the Prentice Hall's Capital Adjustments, the Wall Street Journal Index, and the Center for Research in Security Prices Tape. The study uses an event study methodology. The risk (beta) of common stock before an issuance of debt securities is compared with the risk after the issue. The stock market reaction to the issuance of new debt securities is measured using after-the-event risk. The information content of dividend announcement before a new debt issue is compared to that of after the issue. The findings show that debt issue reduces stock holders' risk if the issuer is a dividend paying company. Also, debt securities issued through an exchange offer increase stockholders' wealth. Finally, issuance of new debt does not affect the information content of dividends.

This dissertation studies topics in the areas of corporate finance and economic development. The first chapter, entitled Capital Quality, Productivity, and Financial Constraints: Evidence from India is co-authored with Poorya Kabir. We provide novel evidence that reduced financial constraints increase physical capital quality and, consequently, productivity. We use a project-level investment dataset from India, CapEx, with data on project cost, capacity added to the firm, and investment's product category. We measure physical capital quality using Unit Investment Cost (UIC), defined as the project cost divided by the additional capacity. We find UIC displays significant variation across firms and is substantially associated with productivity and output quality. However, higher-quality physical capital is more expensive, and without sufficient internal funds, firms cannot invest in them. We study a policy, the establishment of Debt Recovery Tribunals (DRT), which has generated staggered variation in access to external debt financing across different Indian states. We find that firms in treated states borrowed and invested more with all the increased investment coming from an increase in UIC and not from increased additional capacity. Furthermore, treated firms increased productivity and output quality, consistent with the hypothesis that a higher UIC induced by greater access to finance increased firm productivity and output quality. The effect of DRTs establishment is stronger in firms that rely more on external financing and industries with more scope for quality differentiation, a result that further supports this hypothesis. Available evidence suggests that other channels do not completely explain the increased productivity and output quality. Overall, this paper finds physical capital quality is an important determinant of productivity and output quality, and a firm's choice of physical capital quality depends on the availability of financing. The second chapter, entitled Credit Supply and Entrepreneurship in Low-Income Regions is co-authored with Mehran Ebrahimian. We show that bank credit affects entrepreneurship, but only in low-income regions. We present a novel methodology to identify credit supply shock from regional demand shock using comprehensive data on small business loans between pairs of banks and counties in the US. While there is no impact in top income quartile counties, we document that a one std credit shock is associated with 1.6 and 1.7 percentage point employment and payroll growth in newborn firms in bottom income quartile counties. We show that this impact is long-lasting; is pronounced only in newborn firms; is not just a redistribution of labor from established to newborn firms; and does not follow with a reduction in labor productivity. We estimate that a credit redistribution of $100 from high- to low-income counties results in at least $6.5 annual labor earnings in aggregate. In the third chapter, entitled Repair and Maintenance, Investment, and Financial Constraints, I study the role of repair and maintenance cost in capital accumulation which has been mostly ignored in finance and investment literature. I show that repair and maintenance cost is large relative to investment, persistent, and could substitute investment in some circumstances. Empirically I find that the repair and maintenance cost relative to the stock of capital is substantially higher for small and financially constrained firms. I claim that cheap upfront repair and maintenance activity makes it attractive to financially constrained firms. A stylized model of financially constrained firms with endogenous choice of maintenance vs. investment rationalizes the empirical findings. Overall, this paper introduces firm-level maintenance cost data to the literature, investigates its relation to investment, and documents several empirical properties of repair and maintenance costs.

Thesis (Ph. D. Commerce (Business Management)) -- University of Limpopo, 2021 / The current work assessed the link between environmental sustainability commitment and financial performance of firms listed on the Johannesburg Stock Exchange (JSE). Broadly, the researcher aimed to establish whether environmental sustainability commitment as measured by energy efficiency, water efficiency, waste management, carbon emission reduction, material efficiency, green products and services innovation, environmental compliance and stakeholder engagement do affect financial performance. Furthermore, the study tested the moderation effect of industry type on the link between environmental sustainability commitment and financial performance. The study was quantitative in nature with a case study research design. The longitudinal design was adopted where the researcher collected panel data from 2011-2018. The population of the study included all firms listed on the JSE Responsible Investment Index in South Africa. The sample constituted of 32 firms listed on the FTSE/JSE Responsible Investment Index in South Africa. The researcher employed panel regression analysis model to analyse the data. Specifically, the Feasible Generalised Least Squares regression model was utilised in this study. Financial performance was treated as the dependant variable and was measured using return on equity (ROE), return on assets (ROA), earnings per share (EPS), share price and Tobin’s q. The independent variables of the study included components of environmental sustainability; energy efficiency, water efficiency, waste management, carbon emission reduction, material efficiency, green products and services innovation, environmental compliance and stakeholder engagement. Control variables such as firm size and liquidity were used in the study. Mixed findings emerged from the statistical tests. The findings on the relationship between energy efficiency and financial performance suggested that energy efficiency has no significant effect on financial performance as measured by ROE, ROA and Tobin’s Q. Conversely, a significant and negative link was established when energy efficiency was tested against EPS and share price. A significant positive relationship was established between water efficiency and EPS as well as share price. The results further revealed that being water efficient may not significantly affect financial performance when ROE, ROA and Tobin’s Q are used. The results showed no significant relationship between waste management and all dependent variables. The findings indicated that carbon emission reduction was positively and significantly related to EPS and share price. Nevertheless, it was discovered that the nexus between carbon emission reduction and measures of financial performance such as ROE, ROA and Tobin’s Q was positive but insignificant. In terms of material efficiency and financial performance, the findings indicated that material efficiency had an insignificant effect on ROE, ROA, share price and Tobin’s Q. Nevertheless, a significant and negative relationship was established between material efficiency and EPS. Considering green products and services innovation and performance, the findings established a significant negative relationship between green products and services innovation and share price. However, the results further indicated that the link between green products and services innovation and ROE, ROA, EPS as well as Tobin’s Q was insiginificant. The findings exhibited that environmental compliance was negatively related to ROE and Tobin’s Q yet positively related to EPS and share price. An insignificant relationship was established between environmental compliance and ROA. Stakeholder engagement was found to be positively related to EPS. It was also found that the effect of environmental sustainability commitment on financial performance did not differ based on the industry type. The findings rather showed that firms within each industry had specific environmental sustainability commitment and financial performance combinations which were unique to that industry. It was also found that industry type significantly moderates the relationship between environmental sustainability commitment and financial performance. It was concluded that firms can enhance their financial performance from environmental investments which are unique to certain industries as determined by key stakeholders in that sector. Recommendations were made to different stakeholders such as the government, corporate managers and organisations which provide environmental reporting guidelines to play an active role in promoting environmental sustainability commitment among firms. Keywords: environmental sustainability commitment; financial performance; firms; sustainable development; Johannesburg Stock Exchange; South Africa

The purpose of this study was to examine the aspects of redeployment in general terms, and then to present a case study of a specific redeployment program to analyze its effectiveness as a corporate financial tool. The first four chapters discuss the general and financial definitions of redeployment, as well as the objectives, benefits, and alternate methods of the operational asset form of redeployment. The specific redeployment program analyzed is the case study of Ling-Temco-Vought's use of the operational asset form of redeployment. The purpose of the case study was to determine if Ling-Temco--Vought achieved their stated objectives. An analysis of these objectives shows that redeployment was a success.