A research report submitted to the Faculty of Commerce, Law and Management, in partial fulfilment of the requirements of the Degree of Master of Management in Finance and Investments / The aim of this study is to determine if companies listed on the Johannesburg Stock Exchange that comply with Broad Based Black Economic Empowerment (“BBBEE”) policy exhibit abnormal operating financial performance. Whereas previous studies focused on the impact of BBBEE on shareholder wealth by measuring abnormal returns on share prices, this study focuses on the impact of BBBEE on operating financial performance of BBBEE companies. Further, previous studies have focused on just the ownership element of the scorecard; this study BEE considers all the elements of the scorecard by using BEE scores to measure compliance. BBBEE scores, which are used to determine compliance, are obtained from Empowerdex website as well as publications of the Financial Mail Top Empowered Companies (“TEC”) for the years 2004 to 2013. This study uses operating cash flows return as a proxy for operating financial performance. Industry adjusted cash flow returns are used to detect abnormal operating performance. The study uses a sample of 203 companies. The findings show that BBBEE compliant companies achieve a positive abnormal cash flow return of 2.31% over a 10 year period. Further, the findings show that the industry in which a company operates also influences whether or not a company benefits from BBBEE compliance. The study also reveals that BBBEE compliance mostly benefits companies during favourable economic periods as BBBEE companies achieve positive excess returns of 4.15% in the period prior to the economic crisis. Finally, the study reveals that the highest compliant firms are not necessarily the highest performers

A research report submitted to the School of Economics and Business Science, Faculty of Commerce, Law and Management, University of the Witwatersrand, in partial fulfilment (50%) of the requirements for degree of Master of Commerce in Finance Johannesburg, South Africa May 2016 / The empirical literature provides conflicting assessments about how firms choose their capital structure and how macroeconomic variables influence capital structure decision making. There has been a minimal research of the impact of macroeconomic conditions on the adjustment of capital structure towards target, specifically in the context of South Africa. This study employs a sample of South African companies listed on JSE Limited stock exchange from 2000 - 2014 to investigate: (1) the relationship between corporate leverage and firm characteristics as well as macroeconomic variables; (2) the impact of extreme capital market frictions on capital structure decisions; and (3) the relation between macroeconomic conditions and capital structure adjustment speed using an integrated partial adjustment dynamic capital structure model. The research results find evidence that certain firm characteristics and macroeconomic factors have pronounced influence on the capital structure of the sample of listed companies. The empirical results are compared to previous international evidence from developed markets and are in line with the international evidence. Results show that profitability, size and tangibility are significant determinants of firms’ capital structure in the pre- extreme capital market friction periods. The rand crisis of 2001 – 2002 and the global financial crisis period of 2007 – 2009 are considered extreme capital market friction periods. The findings highlights that profitability and size have a different relation to leverage during these extreme capital market friction periods. The extreme capital market friction dummy is significant which means that capital supply conditions are also amongst important factors that need to be considered while determining the financing mix during periods where the supply of capital is disrupted. The findings highlight that demand-side and supply-side factors need to be considered in firms’ financial decision making processes, especially during periods where there is extreme capital markets friction. The research also finds evidence supporting the prediction of theoretical framework that firms adjust to target leverage slower in good states than in bad states, where states are defined by real GDP growth rate and inflation rate. / MT2017

Thesis (M.Com. (Accounting))--University of the Witwatersrand, Faculty of Commerce, Law and Management, School of Accountancy, 2017. / This study investigates whether there is a significant difference between the capital structures of firms listed on the JSE’s main board and those listed on the AltX. The factors influencing the differences are also explored in detail. Non-financial firms listed on the JSE and AltX respectively between 2011 and 2015 were chosen for the study. A panel data regression model was used and five measures of leverage were tested. The findings indicate that the exchange on which a firm is listed has an impact on its capital structure, with firms listed on the AltX having significantly higher levels of leverage than those listed on the JSE’s main board. In support of the pecking order theory, AltX firms are found to be more likely to draw on their internal funds as a first source of finance, even though they are generally less profitable than JSE firms and have less internal funds available. Moreover, AltX firms are found to be more reliant on more accessible short term financing than JSE firms, making them more susceptible to liquidity risks. This higher risk is congruent with the finding that the availability of tangible assets to offer as collateral appears to be a more significant determinant of leverage for AltX firms. The AltX was established to support growth of small and medium enterprises (SMEs) by enabling access to finance. Thus despite the establishment of the AltX, SMEs still face considerable constraints to accessing capital. Keywords: Capital structure, AltX, JSE, SME, information asymmetry / GR2018

The foreign exchange market plays an important role in global finance, as it is considered to be among the largest financial markets in the world because of the significant amount of money involved in the foreign exchange market's transactions. Economic theories show that the exchange rate market may interact with the stock market index, but empirical studies on the interaction between the exchange rate market and the stock market index produced mixed results. Thus there is no empirical agreement regarding the interactions between the stock prices and exchange rate. This study examined the interaction between the real exchange rate and the stock market index in South Africa, with the aim of identifying the effect of exchange rate shocks on the Johannesburg Stock Exchange (JSE). It establishes the direction of causality between the stock market index and the real exchange rate; identifies the long-run and short-run relationships between the South African stock market and the exchange rate and determines the response of the South African stock market to different exchange rate regimes from 1978 to 2008. This study used different econometrics models, including descriptive statistics analysis, Engle-Granger cointegration approach, Error Correction Model and a Granger-Causality test. Variables used in this study include the real values of the JSE all share index and the real exchange rate series (the Rand/U.S. dollar exchange rate) from January 1978 to December 2008. The stock market index responded to changes in exchange rate regimes. Although the response tended to be slightly stronger during the period of the free floating exchange rate, correlation coefficients were insignificant in both fixed and flexible exchange rate regimes. A negative long-run relationship between the real exchange rate and the stock market index was found. The short-run results established that changes in the real exchange rate have no impact on the real stock market index. Granger-Causality tests indicated that there is a bidirectional causal relationship between the South African stock market index and the Rand/U.S. dollar exchange rate. / Thesis (M.Com.)-University of KwaZulu-Natal, Pietermaritzburg, 2011.

The introduction of the Capital Asset Pricing Model in 1964, and its subsequent study by hundreds of thousands if not millions of people at universities throughout the world, has had far reaching consequences in terms of the way portfolios were constructed for many insurance and pension funds. It has affected the investment philosophies of large numbers of investors as well as influenced the calculations of firms costs of capital. Countless investment proposals have been accepted or rejected based on what the Capital Asset Pricing model has calculated the minimum return demanded by shareholders to be. This dissertation looks at the empirical evidence supporting the debate about the usefulness of the Capital Asset Pricing model, as well as presenting evidence as to any possible anomalies to this model on the JSE. / Thesis (MBA)-University of Natal, Durban, 2000.

The theory behind the efficient market hypothesis exerts that it is not possible to consistently outperform the overall stock market by using stock picking and market timing strategies. The argument holds that, in an efficient market, all stock prices are appropriately priced and there is no over- or undervalued stocks to be found. Nevertheless, deviations from true stock prices can occur according to the hypothesis, although these deviations are mostly random occurrences. Thus, the only way an investor can outperform the overall stock market is by luck alone. However, the efficient market hypothesis is a controversial topic where it is often discussed within modern financial circles where academic theory has strong arguments both for and against the theory. Purpose: The purpose of this study is to investigate whether it is feasible to outperform the overall stock market through investing in stocks that appear undervalued according to enterprise multiple (EV/EBITDA) and the price-earnings ratio. / Thesis (MBA)-University of KwaZulu-Natal, Westville, 2009.

Director interlocks have concerned shareholders, the public and legislators since the early 1900’s. In 1914 the Clayton Act prohibited interlocking directorates among competing corporations in the USA. Research has been performed since the 1930’s covering stock exchanges around the world, however very little information was available concerning director interlocks in South Africa. This paper analysed interlocking directorships of the Top 40 companies listed on the Johannesburg Stock Exchange using key metrics as per Newman and Conyon’s Small World theory, comparing the results to research on Italian, French, German, UK and US companies performed in 2008 by Santella, Drago, Polo and Gagliardi. South Africa was found to be closest to Italy, between the low density models (UK and US) and the significantly higher density models (Germany and France), suggesting that rather than just the two camps, there is a continuum currently reflected as the UK, US, South Africa, Italy, France and Germany. The presence of directors with multiple directorships and having significant influence in the network suggests systemic collusion is possible. Analysis performed on the composition of JSE boards showed that many of the King III Code requirements (presence of Non-Executive Directors, split of Chairman from Chief Executive amongst others) are met while some, such as the annual rotation of one third of directors and the independence of directors is problematic. There is still much that can be learned through enhancing the research coverage to provide a factual basis for understanding the impact of legislation and governance codes on the South African network, as well as to perform holistic research covering the combined network formed by board on exchanges across the globe. / Thesis (MBA)-University of KwaZulu-Natal, Durban, 2012.

This paper examines bubbles on the JSE All Share Index as well as the critical time of the stock market crash from 2/01/ 2004 – 27/03/2014. The underlying hypothesis define bubbles as extreme and begin as a group of small events which grow in a super exponential form explained by a log periodic power law model (LPPL model). The hypothesis is based on the assumption of investors’ herding behavior, where investors collude by making investment decision correlated with their counterparties. The paper implements a Savitzky Golary Algorithm to detect peaks and calculate the critical time of the crash from the peaks. An Ordinary Least Squares (OLS) method is used to determine both the value of stock market price index at the critical time and the increase in the stock market price index over the time before the crash. The remaining parameters of the LPPL model are estimated using a Maximum Likelihood Estimation method. On the empirical results; 68 peaks were detected, and the LPPL model at the critical crash time is estimated 34736.586. Five bubbles are detected; the 15/8/2005 bubble, 28/5/2013 bubble, 23/8/2013 bubble, 5/11/2013, and 1/20/2014.

This study analyses whether historically defensive sectors on the JSE have – with respect to the market – proven to be defensive during the recent global financial crisis. By withstanding the shocks of market volatility, defensive industries (such as pharmaceuticals and consumer staples) are renowned for their consistent performance throughout the business cycle. Using daily data for the period 2000–2009, the study compares the descriptive statistics of sector returns before and during the crisis. The volatility of each sector relative to the market index is calculated using the CAPM beta and a simplified volatility ratio. The same comparison is extended to the conditional volatilities of each of the sectors, which is estimated using the GARCH model and two of its extensions: the EGARCH and GJR GARCH models. While no sector experienced a positive mean return during the financial crisis, Healthcare, Consumer Goods, Consumer Services and Industrials all proved less volatile than the market. Surprisingly, Telecommunications proved more volatile than the market and experienced leverage effects during the financial crisis. Since the timing of a recession is difficult to predict, defensive securities were found to be a useful investment tool for protection against adverse movements in the stock market.

Mergers and acquisitions are a key component in the toolbox of business strategies that companies employ to improve organisational performance. Empirical studies that focus on domestic mergers and acquisitions activity in developed countries are numerous, however there remains a limited amount of research into the effects of cross border mergers and acquisitions on the performance of acquiring companies, especially in emerging markets. This research examined whether cross border mergers and acquisitions concluded by acquiring companies listed on the Johannesburg Stock Exchange have a positive or negative impact on the operating financial and short term share price performance of the listed acquirer. A quantitative approach was adopted for the purpose of this research. In order to analyse the impact of cross border mergers and acquisitions transactions on the share price and operating financial performance of listed acquiring firms secondary data was utilised. The research incorporated publicly available daily share trading data for shares traded on the Johannesburg Stock Exchange and financial and accounting data sourced from McGregorBFA. In addition, the sample of cross border mergers and acquisitions transactions was obtained from the MergerMarket database. Purposive sampling was applied to select an initial sample of 44 transactions. Based on the exclusion of confounding events a final sample of 29 transactions was tested. Given the small sample size, and that confounding events were determined not to have a material impact on the cross border transactions, comparative analysis was performed using the initial sample of 44 transactions. Different lenses were applied for testing financial performance by using three performance measures. These included abnormal share price returns; key financial performance ratios and industry adjusted operating cash flow return on assets. Various short-term event windows were analysed for each of these measures. Parametric tests including t-tests for unequal variance and paired t-tests were applied in the research. Given the small sample size non-parametric testing in the form of Wilcoxon Signed Rank Sum tests was also applied. In addition, bootstrapping was applied to the cumulative average abnormal returns. This research concluded that both the short-term share price and operating financial performance of acquiring companies listed on the Johannesburg Stock Exchange does not improve significantly in the short-term post the cross border merger or acquisition transaction. / Dissertation (MBA)--University of Pretoria, 2013. / lmgibs2014 / Gordon Institute of Business Science (GIBS) / MBA / Unrestricted