Includes bibliographical references. / This study has a number of interrelated objectives that seek to understand and contextualize the Altman bankruptcy prediction model in the setting of the South African medical schemes over a ten year period (2002 to 2011). The main objective of this study is to validate the Altman Z₂ model amongst the medical schemes in South Africa; in terms of accurately classifying Z₂-scores of ≤ 1.23 and ≥ 2.9 into the a priori groups of failed and non-failed schemes. The average classification rates in the period 2002 to 2011 are as follows: 82% accuracy rate and 17.9% error rate. A linear trend line inserted in the graph shows the accuracy improving from 72% to 91% between the period 2003/2004 to 2011/2012. This outcome is consistent with the conclusion in previous studies (Aziz and Humayon, 2006: 27) that showed the accuracy rates in most failure prediction studies to be as follows: 84%, 88%, and 85% for statistical models, AEIS models and theoretical models respectively. Although this study validated the Altman model, further studies are required to test the rest of the study objectives under conditions where some of the assumptions are revised.

The management of market risk is an essential determinant of the stability of a financial institution, and by extension, of the overall financial system. There are various variables which impact on the accuracy of a market risk management system. For various reasons which are discussed in this study, Value at Risk (VaR) is used as a measure of market risk. VaR has certain key features which make it adaptable to several types of scenarios in order to provide a measure of market risk. In order to assess these features of VaR, this study evaluates VaR using a range of techniques. This study analyses the performance of some of the most popular VaR models using the JSE ALSI's total daily returns. The VaR estimates were calculated for each model using varying parameters for confidence level, risk horizon, distributional assumptions and other variables. The study evaluates the relative accuracy of each model analysed, over specific subsets of the data set under consideration, and performs five different backtests to determine the accuracy of each model. The aim of this analysis is to identify the model most suited to predicting VaR in the South African environment. A key feature of this study is that it includes data during and after the financial crisis, and can, therefore, model the respective volatility characteristics of the data during this period. The results of the analysis indicate that the asymmetric GARCH models outperform the other models over both the full sample period and the crisis and post-crisis subperiods, and that the t distribution assumption produces more accurate forecasts. This implies that such models are better suited to capturing the effects of volatility for data with these characteristics.

A significant body of research exists in psychology pertaining to the various biases which influence human decision-making. A growing body of knowledge on the understanding of decision-making in an investment setting has been established over the last 30 or so years. The objective of this study is to understand the factors influencing investment decision-making, before and after an emotional intelligence intervention. This study places the focus on the most common cognitive psychological biases which may affect investment decisionmaking, by establishing these biases in behavioural finance under the theoretical literature review. The research is scoped in the form of a case study. Two survey questionnaires were deployed on a sample of investment professionals within the vicinity of the city of Cape Town. The questionnaires seek to establish whether participants exhibit common cognitive psychological biases by phrasing questions in both investment and non-investment scenarios. On completion of the first questionnaire, each participant read an informative article on the subject of emotional intelligence and the development thereof before proceeding to the second questionnaire. The objective of this article is to make participants aware of, and create an understanding of emotional intelligence and the development thereof. The results of both questionnaires were analysed to establish whether participants exhibit any change in their responses. The analysis confirmed varied results for the biases considered. Whilst participants appeared to exhibit higher prevalence of availability and anchoring bias post the emotional intelligence intervention, participants exhibited lower indications of herding, self-control & mental accounting bias post the emotional intelligence intervention. Participants appeared equally loss-averse in both questionnaires. Therefore, in summary, the results show that, at least to some extent, the participants exhibited the biases considered, and after the introduction of the construct of emotional intelligence and the development thereof, a change in most of the responses were noted. By design, the scope of this study and the sample size observed does not make it possible to extrapolate these results beyond the sample group. However, the results positively demonstrate a solid basis for future research on the measured impact of an emotional intelligence intervention on investment professionals and the role of emotional intelligence and consequent bearing thereof on investment decision-making.

This study investigates and concludes on thus the predictability of economic activity in South Africa through the use of share price indices and banking sector asset levels as leading indicators. This study investigates share price and banking sector information using both nominal and real quarterly and monthly time-series data for the period March 1998 to October 2017. For share prices analysis, it takes market segmentation on the JSE into account, and examines causality between the All-Share index, the Industrial index, the Resources index and the Financial index against GDP and the index of Industrial Production (IIP) using the test proposed by Granger (1969). For the banking sector development analysis, it takes the South African Reserve Bank’s disclosure of all banking institution assets and examines if changes in those asset levels Granger-cause the changes to GDP and IIP. This study builds on the work performed by previous studies, specifically on Sayed, Auret and Page (2017) and Har, Ee, and Tan (2009), which test the leading relationship of the stock market for economic activity. This study adopts a similar approach to these studies, while also making certain adjustments and additions to their methodology, aiming to produce more robust findings. This study not only tests for a new relationship between banking development and economic activity, but it also conducts several additional stationarity tests to provide more conclusive evidence of the data’s stationarity before Granger-causality testing is performed. The additional stationarity tests in this study establish that some time series data, which Sayed et al. (2017) concluded to be stationary, is in fact not stationary, and this contrary finding directly impacts the subsequent Granger-causality testing and results. This study also notes and corrects Sayed et al.'s(2017) methodology which fails to perform subsequent stationarity testing on its differenced time series data, and thus fails to prove that the transformed data is satisfactorily stationary and acceptable for Granger-causality testing. Another adjustment we make to the methodology is the interpretation of the Index for Industrial Production (IIP), which we view as a volume based index rather than a price based index that can be adjusted for inflation, which was the position of Sayed et al. (2017). The empirical investigation of this study reveals some positive evidence in favour of the JSE as a leading indicator of economic activity, where unidirectional causality is established between the four market segmentation proxies and the macroeconomic variables. This is however less conclusive than the findings of previous South African studies, which is explained. For the banking sector’s development analysis, the empirical tests produce inconsistent findings across monthly and quarterly data, leaving one unable to confirm a causal relationship existing between the banking sector’s development and economic activity.

Includes abstract. / Includes bibliographical references. / The purpose of this study is to evaluate the financial impact of Black Economic Empowerment (BEE) transaction announcements on shareholder value. The study investigated 49 BEE transactions (classified as 28 disposals, 9 acquisitions, 9 employee share schemes and 3 broad based schemes) over a testing period of 72 months between 2000 and 2008.

Includes bibliographical references. / The South African unit trust industry was found to display low levels of Active Share compared to international levels. A sample of unit trusts, representing approximately 58.2% of assets under management in the South African general equity fund industry, was selected based on the availability of the information necessary to perform this analysis. The average Active Share demonstrated by the sample of unit trusts has decreased from 60.85% in June 2007 to 55.65% in June 2013. A fund flow analysis confirmed that fund managers' portfolio decisions are highly affected by the risk of outflows and possibility of inflows. Managers faced with a high risk of outflows and low possibility of inflows adjusted their Active Share by approximately double that of managers with a moderate risk of outflows and inflows. A similar result was found when comparing managers experiencing a low risk of outflows and a high possibility of inflows, to managers experiencing a moderate risk of outflows and inflows. Under varying market conditions, unit trusts exhibiting the highest Active Share and tracking error (concentrated stock picker) earned a significantly higher alpha than unit trusts exhibiting the lowest Active Share and tracking error (closet indexer). During the financial crisis and in the subsequent bull market to previous highs, concentrated stock pickers earned a significantly higher alpha than closet indexers. In bull markets breaking through previous highs, concentrated stock pickers earned the lowest alpha. The alpha earned by unit trusts exhibiting the highest level of Active Share was significantly higher than the alpha earned by unit trusts exhibiting the lowest level of Active Share. The benefit of distinguishing between truly active (concentrated stock picker) unit trusts and closet indexer unit trusts is clear.

The purpose of this study is to investigate whether abnormal returns are earned on insider trading on the Johannesburg Stock Exchange (JSE). The study first tests the strong form of the Efficient Market Hypothesis by investigating whether abnormal returns are earned by directors purchasing or selling their own firms' shares, and thereafter the semi-strong form of the Efficient Market Hypothesis by investigating the occurrence of abnormal returns earned by outsiders mimicking these director transactions once they are publically announced (which has to be within 48 hours). In addition, this study tests whether these abnormal returns are dependent on firm size, and secondly whether a firm's industry classification, as defined by the JSE, has an effect on the magnitude of abnormal returns earned by directors and outsiders mimicking these transactions. Event study methodology, in conjunction with the Market Model, is used to calculate the abnormal returns for a sample of 1,026 directors' trades made on the JSE between 2007 and 2012. The results indicate that directors in many of the subsamples tested earn statistically significant abnormal returns in the short term (defined as 20 days post the event date), when purchasing or selling shares in their own companies, although more so on sale trades. There is strong evidence of directors being able to time the market, and that outsiders can mimic directors' trades once these become public knowledge to also earn abnormal profits. These findings are inconsistent with both the strong and semi-strong forms of market efficiency. The study further finds a negative correlation between abnormal returns earned and firm size for both director share purchases and sales. This supports the theory that insiders in smaller companies, which are less exposed to market scrutiny than larger firms, possess greater private information than their counterparts in larger listed businesses. Finally, it is found that the highest insider abnormal returns were earned by director purchases in the Basic Materials and Oil & Gas sector, with the lowest abnormal returns earned in the Consumer Goods and Technology and Telecommunications sectors. The findings of this study have both theoretical implications in terms of the market efficiency of the JSE, as well as practical insights for investors looking for a profitable trading strategy based on director trades.

Includes abstract. / Includes bibliographical references. / Increased emphasis by professional bodies on fostering life-long learning has resulted in interest in student approaches to learning. The aim of this paper is to provide a preliminary investigation into the approaches to learning of accounting students in the context of a South African university by sampling students studying a professionally accredited post-graduate programme. A further aim is to investigate the potential differences in these approaches to learning between each of the four core subjects of this post-graduate programme, as well as differences between male and female students, and students achieving differing academic grades. The intention is to serve as a basis for further research within this context as well as provide insights for accounting educators into both student approaches to learning, and links to the learning environment. The Approaches to Study Skills Inventory for Students (ASSIST) was administered to a group of volunteer students all studying the Post-Graduate Diploma in Accounting (PGDA) at the University of Cape Town (UCT). The applicability of the ASSIST survey was tested via confirmatory factor analysis and thereafter the data was analysed to measure the general tendencies of students to favour either a Deep, Surface or Strategic approach to learning. The findings of this study indicate the ASSIST survey is applicable within the context administered although inconsistencies in student responses for one of the four subjects warrants further research. In analysing the data, UCT PGDA students were found to favour a Strategic approach to study, which could be partially attributed to intensive workloads as well as pressure to pass final examinations – passing these exams would grant them eligibility to sit the first of two professional examinations. Generally, no statistically significant differences between student approaches to learning for each of the four core subjects could be observed, nor between student approaches to learning for each gender. However, academically stronger students were found to have less fear of failure; a greater achieving tendency, as well as feeling more comfortable in managing their time. The use of the ASSIST survey in this context is acceptable and initial indications suggest that UCT PGDA students feel discouraged from using a surface approach to learning – a step toward fostering competence in life-long learning.

For several decades equity-based compensation has been used as a tool to align the incentives of company executives and employees with those' of the company shareholders. For instance globally, during the 1990's, there was an explosion in the issuance of employee stock options. This served several purposes, namely - to motivate managers, in the pursuit to increase company value and achieve long-term goals as a retention tool for talented staff and also as a way for cash strapped young companies to reward employees without the need to divert cash from operating activities. The global financial crisis, accompanied by a multitude of very costly high profile bailouts, has led to significant shareholder and tax payer dissatisfaction, and has succeeded to highlight the inherent deficiencies of traditional share-based incentive schemes such as stock options. Increased scrutiny and calls for better corporate governance, together with evolving accounting and tax treatment, have ultimately led to a shift in share-based incentive schemes practices. Globally, several important developments have emerged. For instance, there has been a marked move away from simple stock option-type schemes towards less dilutive Share Appreciation Rights and also full quantum share schemes. In addition, performance conditions (relative as well as absolute) have become increasingly prevalent in terms of grant vesting (PWC, 2011). The objective of this study is to examine the current long-term share-based incentive schemes used by JSE listed companies based on data from 50 large and mid-cap companies. It aims to identify, trends in terms of prevalent scheme types, average scheme size relative to issued share capital, settlement methods, valuation models used, construction of model inputs and the use of performance conditions. These trends are framed in the context of South African tax legislation and IFRS2 accounting standards. The analysis indicates that in recent years South African listed companies have followed the global approach towards share-based incentives, namely: * Share Appreciation Rights are being used more frequently * Full quantum schemes are ,also becoming more popular * There is increased use of performance conditions embedded in grants * Companies are moving away from the 'one size fits all' approach and are starting to use combinations of schemes to simultaneously address issues such as staff retention, preventing excessive risk taking by managers and attaining short, medium and long term strategic targets.

This paper provides evidence of the existence of IPO underpricing on the JSE between 2000 and 2008. Average underpricing over the period was found to be 17.1 percent (median: 9.4 percent). In line with the general global decline in first day returns following the end of the internet bubble period, average underpricing on the JSE has decreased relative to previous studies.