A research report submitted to the Faculty of Commerce, Law and Management at the University of the Witwatersrand in partial fulfilment of the requirements for the degree of MM in Finance and Investment March 2015 / Individual investors often do not have access to share trading information and even if they do, they may not be able to understand or accurately interpret this information. Investors rely on financial analysts’ forecasts and stock recommendations in order to make profitable investment decisions. The role of the financial analyst is an important one with two key objectives: earnings forecasts and stock recommendations (Loh and Mian 2006). These financial analysts play a significant role in the efficient functioning of global stock markets. The aim of the financial analyst is to evaluate shares trading on the stock market and their future price appreciation or depreciation to develop new buy, hold or sell recommendations to maximize shareholder wealth. The extant literature recognizes that new buy, hold and sell recommendations made by financial analysts have a substantial impact on the market (Womack, 1996). Research on financial analysts has become prevalent in financial literature with the promotion of financial analysts to the level of integral economic proxies worthy of individual examination (Bradshaw, 2011). The aim of this research report is to investigate whether financial analysts’ stock recommendations enhance or destruct shareholder wealth. The extant literature on financial analysts’ stock recommendations and forecasts suggests that the analysts’ recommendations have both a significant and an insignificant effect on stock prices in the market following the months after the change in recommendation is made. The accuracy of the financial analysts’ stock recommendations are measured in the months following the change in recommendation through determining if the recommendation outperforms the market benchmark. This report examines the effects of analysts’ recommendations on the performance of stocks on the Johannesburg Stock Exchange and concludes through determining if the share underperforms or outperforms the market benchmark surmising that to a varying degree there is value to be found in financial analysts’ stock recommendations for the individual investor.

Thesis submitted in fulfilment of the requirements for the degree of Master of Management in Finance & Investment in the Faculty of Commerce Law and Management Wits Business School at the University of the Witwatersrand / The objective of this paper is to study the exit behaviour of private equity investments held by independent private equity firms in South Africa. As this is an exploratory study we examine empirical hypotheses previously tested by other authors. Firstly, we test whether portfolio companies within high technology sectors are more likely to achieve an initial public offering (IPO) exit relative to other exits. Secondly, we test the effect of the lending rate on the likelihood of a secondary sale. Lastly, we consider the relative preference of IPO compared to acquisition (M&A) and other exit modes. As South Africa is considered to be a bank-centered financial system (Levine, 2002), private equity investments within the market would be expected to experience poor IPO activity as suggested by the literature (Black and Gilson, 1998).The research is quantitative in nature and involves the use of statistical modelling, multinomial logistic regression was applied, using panel data, which assumes that the effect of explanatory variables on the choice of exit varies across observations (private equity firms) and over time. From the multinomial logit model it was found that; 1) High technology firms were more likely to be exited by means of M&A rather than IPO; 2) An increase in the lending rate was found to increase the likelihood of a Secondary sale which is contrary to previous research (Sousa, 2010); and 3) M&A was found to be the most likely mode of exit assuming all explanatory variables were at their mean, while IPO was the least likely mode of exit. / MT2017

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

University of the Witwatersrand Wits Business School Master of Finance and Investment (MMFI) / Using panel data analysis, this paper empirically examined the relationship between corporate governance and dividend payout for a sample of 109 firms listed on the JSE securities exchange over the period 2009-2013. The results show that board composition is positively related to dividend payout while institutional ownership is negatively related to dividend payout. Our findings also show a positive association between firm growth and dividend payout.

Thesis submitted in fulfilment of the requirements for the Masters in Finance and Investments in the Faculty of Commerce, Law and Management Wits Business School At the University of Witwatersrand / The study focuses on determining the driving factors of the performance of different hedge fund strategies in the South African industry. This is done through the application of an augmented capital asset pricing model. The model is predicated on the original (Sharpe, 1964) and (Lintner, 1965) Capital Asset Pricing Model. The researcher uses the excess market returns and the South African Volatility index as independent variables in the explanation of hedge fund returns at strategy and portfolio level. Through the analysis, the researcher finds that the excess market returns and the South African Volatility Index characterize the hedge fund expected returns for some of the strategies using OLS and GMM techniques. The second section uses a system of seemingly unrelated regressions for both the OLS and GMM techniques to determine if the two explanatory variables are priced into the different strategies; this indeed is shown to be the case for some of the strategies examined in the analysis. / MT2017

Doctoral thesis submitted to the University of the Witwatersrand, Faculty of Commerce, Law and Management in fulfilment of the requirements for the degree of the Doctor in Philosophy, December 2016 / Healy and Wahlen (1999:368) define earnings management as an event that “occurs when managers use judgement in financial reporting and in structuring transactions to alter financial reports to either mislead some stakeholders about the underlying economic performance of the company or to influence contractual outcomes that depend on reported accounting numbers.” Management’s intent to mislead users distinguishes accruals that signal managers’ inside information about future cash flows from earnings management which intends to misrepresent performance (Dechow and Skinner, 2000; Parfet, 2000). Earnings management is a very serious issue; if it is not detected it can result in large financial losses for investors and creditors. Earnings data is a fundamental input to valuing a firm’s shares and prospects. Erroneous assessments of future cash flows because of misleading information will result in invalid share valuations and incorrect lending decisions which can have negative consequences on capital markets. The severe negative consequences of earnings manipulation, if undetected, suggest that investors, auditors and regulatory bodies should be aware of the prevalence of earnings management in an economy, whether investors are able to detect and price suspected earnings management and the most efficient way to detect it. This thesis aims to answer two fundamental questions: Does earnings management exist in South Africa? Are investors in South Africa misled by earnings management? How to detect earnings manipulation is the predominant theme in earnings management literature. The majority of research has been conducted in advanced economies and has transformed from identifying discontinuities in earnings distributions and measuring discretionary accruals to sophisticated predictive models, such as the F-score (Dechow, Ge, Larson and Sloan, 2011). Yet, research into the subject is sparse in emerging markets and tends to replicate existing methodology. The objective of this thesis is to examine earnings management in the South African economy, with the specific aim of identifying a databank of suspected earnings management firms that can be used for further research. Because the number of firms that have been forced to restate earnings is small in this environment, this thesis resorts to identifying suspected earnings management firms using discontinuities in earnings distributions. South Africa is similar to other emerging economies in that it is characterised by concentrated ownership, weaker legal enforcement and a smaller stock exchange. The South African environment is dissimilar to emerging economies as the JSE is considered to be well regulated, accounting and auditing standards are world class and accounting transparency and disclosure are satisfactory (Leuz, Nanda, and Wysocki, 2003). The results of this thesis are relevant in an institutional and macroeconomic setting where incentives to manipulate earnings, enforcement, legal protection, rule of law and sample size may differ from those in developed economies. This thesis firstly, focuses on methodological issues that may be encountered by researchers in identifying discontinuities in earnings distributions in emerging economies and secondly, validates kernel density estimation, Lahr (2014), as a viable methodology to test for earnings management by comparing total accruals, discretionary accruals and working capital accruals between suspected earnings management and non-earnings management firms. Thirdly, deferred tax expense is considered as a predictor variable in place of discretionary accruals in detecting suspected earnings management firms. Finally, in order to investigate investors’ reaction to suspected earnings management this thesis investigates whether the market prices suspected earnings management firms differently from non-earnings management firms. Pre- selected researcher binwidths (Burgstahler and Dichev, 1997, Coulton, Taylor and Taylor, 2005, Glaum, Lichtblau, and Lindemann, 2004; Holland and Ramsay, 2003) prove to be unsuitable in this milieu. Consequently kernel density estimation Lahr (2014), which derives bandwidths from the empirical earnings distributions, is used to identify discontinuities and to concurrently investigate the effect of deflation on the location of discontinuities. Discontinuities are shown to exist in earnings levels and changes distributions and emerge around zero in earnings levels distributions where number of shares is the deflator. Two important results emerge from this analysis. Firstly, when kernel density estimation is used in levels distributions, there is evidence that deflating by market value of equity and total assets shifts the location of suspected earnings management firms to the second and third intervals to the right of zero. Scaling does not alter the location of suspected earnings management firms in earnings changes distributions. Secondly, in the earnings deflated by number of shares distribution there is evidence that the band of suspected earnings management firms contains the results of firms that have upwardly and downwardly manipulated earnings. The implication of these findings are that deflating by number of shares is probably the most efficient scalar and that if doubt exists, alternative deflators should, at least, be compared between profit and loss firms. In addition, in the presence of evidence of downwards earnings management, researchers should evaluate whether and how to identify firms that are suspected of having reduced earnings. Specifically in emerging market research, these results indicate that it is inappropriate to merely replicate distribution research based on researcher selected binwidths and that kernel density estimation is probably more efficient in identifying discontinuities as it gives researchers a much broader perspective on the location of discontinuities. Kernel density estimation is confirmed as a method to identify discontinuities in earnings levels and changes distributions by comparing total, discretionary and working capital accruals between suspected earnings management and non-earnings management firms. Evidence that discontinuities in earnings distributions may be attributable to earnings management activities is found where earnings levels and earnings changes are deflated by number of shares and market value of equity, both modified Jones and asymmetric BS discretionary accruals are significantly income increasing in suspected earnings management (EM) firms and income decreasing in non-EM firms. Scaling by total assets is not a suitable deflator in the South African context as it appears to affect the sign and statistical significance of the accruals metrics in the earnings levels before and after tax distributions. This result does not detract from the efficiency of kernel density estimation as it is attributable to the inefficiency of total accruals as a scalar in an emerging market environment. Furthermore, this research endorses Ball and Shivakumar’s (2006) (BS) finding that an asymmetric discretionary accruals model is more efficient in estimating discretionary accruals in all the distributions, irrespective of deflators. In addition, the results of this thesis show that, in an emerging economy, deferred tax is incrementally useful to modified- Jones and the asymmetric BS discretionary accruals in detecting earnings management. The implication of this result is useful to investors, auditors and regulators because deferred tax movements and its components are a visible and identifiable numbers in financial statements. Deferred tax expense can be used, instead of complicated discretionary accrual models, to identify evidence of earnings management. This means that the components of the deferred tax asset or liability accounts can be analysed to highlight unusual movements which may in turn, focus attention on unusual accruals. For researchers, this result has important implications. Kernel density estimation can be used to identify suspected earnings management firms which can be used to further research. The final chapter of this thesis explores whether investors price suspected earnings management and nonearnings management firms differently and finds that, in this South African sample, there is no difference in price levels or cumulative abnormal returns in suspected earnings management and non-earnings management firms. This result is in sharp contrast to Balsam, Bartov, and Marquardt (2002) and Baber, Shuping, and Sok-Hyong (2006) who report a negative association between unexpected discretionary accruals and cumulative abnormal returns and Keung, Lin, and Shih (2010) who find that investors react negatively to zero or small earnings surprises. To some extent the results of this section of the thesis supports the finding in Gavious (2007) that prices react to discretionary accruals only after the introduction of revised analysts’ forecasts.The finding in this thesis implies that investors in South Africa are unable to detect earnings management. This outcome should be viewed in the context of prior research that reports that the JSE may be inefficient (Bhana, 1995, 2005, 2010; Hoffman, 2012; Ward and Muller, 2012; Watson and Roussow, 2012) and may be attributed to the fact that there is no signal to investors that the quality of earnings may be questionable in the sample of suspected earnings management firms. All in all, the findings of this thesis indicate the existence of earnings management in listed companies in South Africa. / XL2018

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

Thesis (M. Sc. (Statistics)) --University of Limpopo, 2014 / analysis of price indices of electrical appliances in South Africa is performed using monthly data from Statistics South Africa for the period January 1998 to December 2010, with 2005 as a base year. Time series analysis (exponential smoothing and ARIMA) and neural networks are employed in developing forecasting models. The results for single, double and triple exponential smoothing are compared and triple exponential smoothing is found to be the best model amongst the three to forecast the electrical price indices in South Africa. ARCH models were also employed for the variable that failed to pass the requirements from ARIMA. Comparing neural networks, ARIMA and triple exponential smoothing results, neural networks is found to be the best model for forecasting price indices of electrical appliances. Regression analysis was then applied to the lighting equipment variable to check for a monthly effect after its plot depicted some seasonality pattern. Only the month of February did not have an impact or an effect on time since it was found not to be significantly different from zero. Multivariate time series is also applied in checking the correlation between the variables. Keywords: Time series analysis, ARIMA, ARCH, multiple linear regression, exponential smoothing, neural networks, electrical price indices.

Pharmaceuticals are a crucial component of delivering healthcare, hence regulating pharmaceutical markets is a complex issue involving dynamic interplay of multiple actors. The South African healthcare industry is plagued with past problems and new ones created by cumbersome legislation, changing economic conditions and rapid cost escalation. The core objectives of the 2004 medicines pricing legislation were; effective care and use of resources; high quality services and responsiveness; accessibility and affordability of medicines for consumers. This study explores the impact of the new medicine pricing regulations on independent community pharmacies in KwaZulu-Natal, wherein 115 out of a total of 364 independent pharmacies participated. The main aim was to determine the number of pharmacies that closed and the emerging trends in this sector by qualitatively and quantitatively analyzing the legislation, policy implementation and its impact on various stakeholders. Data was collected via semi-structured interviews; a survey questionnaire and document analysis. The study revealed that, more consultation was needed for a sustainable dispensing fee since between 72 and 83 pharmacies had closed in KZN from 2003 to 2009; due to them being uneconomical. Tools used to illustrate legislative impact were Porter’s value chain, Force-Field analysis and the Fish-Bone diagram. The emerging trends underscored government’s need to provide a democratic environment conducive to small business growth, with the recommendation that policy makers strategically respond to the real world in which health sector reforms must be implemented. / Thesis (MBA)-University of KwaZulu-Natal, 2009.

Trade liberalization and globalization have resulted in the free flow of goods, services, capital and people. In this regard ports play a vital role in linking supply chains, as goods flow from the point of inception through the chain up to the customer at the end. This research was conducted to determine and evaluate the role of logistics in the value chain of steel products that pass through Durban Port. The impact of logistics - measured in terms of costreduction, shorter lead times and better customer service - that would contribute to the competitive advantage of businesses was evaluated. Other countries like China and India are also manufacturers of steel products, and it is therefore important for South Africa not to lose international markets due to prices and products that are not internationally competitive. In essence, this paper unpacks the debates surrounding the high prices of steel products from South Africa, and suggests how these prices can be reduced. In this regard the investigation into steel products provided an excellent case study, as steel contributes significantly to the GDP of the country. The study analyses all logistics activities like transportation, warehousing, handling, quality control of goods and a just-in-time management approach. Informal interviews and a case study based on Durban Port highlight the role that logistics activities play in adding value to goods that pass through Durban Port. The implications of the findings are discussed and proposals for redefining the role of logistics in an organization are offered. / Thesis (M.A.)-University of KwaZulu-Natal, 2008