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The relationship between debt levels and total shareholder return of JSE-listed platinum companies / Sandra JoosteJooste, Sandra January 2015 (has links)
Investors make investment decisions based on their risk appetite. Furthermore, when
such investors consider shares as part of their investment portfolio, these investors
will consider the risk profile of the company it is interested in. By taking on a certain
level of risk, shareholders expect to be commensurately compensated. Shareholders
of companies with relatively higher debt levels in their capital structure and therefore
higher financial risk, require a relatively higher return on their investment in order to
compensate for such additional risk taken. Shareholders expect return in the form of
dividend pay-outs, and capital growth in the share price. A positive correlation is
therefore expected between the debt levels of a company and the total return to their
shareholders, i.e. the sum of the dividend pay-outs and the capital growth in the share
price, also referred to as total shareholder return (TSR).
The focus of this study is on the platinum industry in South Africa, as this industry is
vital to the South African economy in terms of job creation and earner of foreign
exchange as South Africa dominates the world production of platinum. The purpose of
this study is to investigate whether there is a correlation between the debt levels and
the total shareholder return (TSR) of platinum companies listed on the JSE Ltd.
Quantitative research techniques were used to address the research problem, making
use of secondary data and rank correlation-based research. Firstly, the debt-to-equity
ratio for each company was calculated based on book values. Secondly, the TSR of
each company was calculated considering the dividends received and capital growth
in share price. The correlation between the TSR and the debt-to-equity ratio was
determined using Spearman’s rank correlation coefficient.
The results were inconclusive, i.e. no, negative and positive relationships where the
relationship is for the first 12 years not significant and for the last two years significant.
Therefore the final conclusion is that this study is inconclusive to support or to reject
the conceptual scope of the study in that risk is concomitant to return, i.e. returns
compensate for risks, therefore higher debt levels require higher total shareholder
returns (and vice versa).
This study contributes to the literature on capital structure decisions from a South
African platinum company perspective. The core audience will be the management of
South African platinum companies considering changes in their capital structure as
well as investors considering investing into a listed platinum company. / MCom (Management Accountancy), North-West University, Potchefstroom Campus, 2015
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The relationship between debt levels and total shareholder return of JSE-listed platinum companies / Sandra JoosteJooste, Sandra January 2015 (has links)
Investors make investment decisions based on their risk appetite. Furthermore, when
such investors consider shares as part of their investment portfolio, these investors
will consider the risk profile of the company it is interested in. By taking on a certain
level of risk, shareholders expect to be commensurately compensated. Shareholders
of companies with relatively higher debt levels in their capital structure and therefore
higher financial risk, require a relatively higher return on their investment in order to
compensate for such additional risk taken. Shareholders expect return in the form of
dividend pay-outs, and capital growth in the share price. A positive correlation is
therefore expected between the debt levels of a company and the total return to their
shareholders, i.e. the sum of the dividend pay-outs and the capital growth in the share
price, also referred to as total shareholder return (TSR).
The focus of this study is on the platinum industry in South Africa, as this industry is
vital to the South African economy in terms of job creation and earner of foreign
exchange as South Africa dominates the world production of platinum. The purpose of
this study is to investigate whether there is a correlation between the debt levels and
the total shareholder return (TSR) of platinum companies listed on the JSE Ltd.
Quantitative research techniques were used to address the research problem, making
use of secondary data and rank correlation-based research. Firstly, the debt-to-equity
ratio for each company was calculated based on book values. Secondly, the TSR of
each company was calculated considering the dividends received and capital growth
in share price. The correlation between the TSR and the debt-to-equity ratio was
determined using Spearman’s rank correlation coefficient.
The results were inconclusive, i.e. no, negative and positive relationships where the
relationship is for the first 12 years not significant and for the last two years significant.
Therefore the final conclusion is that this study is inconclusive to support or to reject
the conceptual scope of the study in that risk is concomitant to return, i.e. returns
compensate for risks, therefore higher debt levels require higher total shareholder
returns (and vice versa).
This study contributes to the literature on capital structure decisions from a South
African platinum company perspective. The core audience will be the management of
South African platinum companies considering changes in their capital structure as
well as investors considering investing into a listed platinum company. / MCom (Management Accountancy), North-West University, Potchefstroom Campus, 2015
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Analyzing the Effects of Credit Rating Changes, the Recent Financial Crisis and Other Variables on Firms' Debt LevelsWasserman, Sean M 01 January 2011 (has links)
This paper utilizes a sample of firms over the years 2000–2009 to test the effects of credit rating changes, the financial crisis, interest rates, and other variables on short-term, long-term, and total debt levels on the balance sheet. Each independent variable was created using a one year lag in order to run the regressions. The values of these variables from the previous year are being analyzed to see if they can predict debt levels for the following year. The results of this paper suggest that levels of long-term and total debt are somewhat reliant on and are positively correlated with the federal funds rate. The results indicate that short-term debt levels are much harder to predict, but they appear to be negatively correlated with the financial crisis. Long-term debt levels were also affected by this variable, but were positively correlated with it. Z-score was a significant predictor of all types of debt, and was positively correlated with each. In an effort to acquire as many data points as possible for the regressions, strict data filtration techniques were used. This limited the sample to 177 firms. The overall insignificance of the results in this study suggest that further research on what drives debt levels on the balance sheet is necessary. This will generate a greater understanding of firm behavior both inside and outside of a financial crisis.
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What are the main drivers of leverage in leveraged buyouts?Mlynarczyk, Wiktor, Holm, Erik January 2013 (has links)
This paper examines the main drivers of leverage in leveraged buyouts, and provides an explanation for the significant decrease in leverage in the aftermath of the financial crisis. We test market-varying factors by regressing leverage measures on potential drivers and find that leverage is largely driven by debt market conditions and private equity market activity. In particular, we argue that liquid debt markets impact buyout leverage more than other macro-factors, such as future view on equity markets and interest rates. Private equity market activity being a driver implies that leverage increases when markets are characterised by fierce competition. Moreover, the results also suggest that leverage determinants changed as a consequence of the financial crisis. Leverage is in recent years highly related to debt market liquidity and equity markets, but independent of private equity market activity. We argue that this is a consequence of increased macro awareness and more conservative views on company outlooks.
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