M.Comm. / The study assessed the conformance of the companies listed on the Johannesburg Securities Exchange Social Responsibility Index to the best practices regarding the composition of the board and its committees. The board of directors is regarded as an effective mechanism in solving the agency problem that is caused by the separation of control and ownership. The composition of the board and its committees, particularly the strong presence of independent non-executive directors, enable the board to effectively monitor the actions of executive management which minimise the occurrence of fraud and corporate failures. Companies that subscribe to good corporate governance practices which includes the composition of the board and its committees are regarded highly by investors. The study assessed the extent to which the companies listed on the JSE SRI index conformed to the corporate governance best practices. The sample consists of the constituents of the JSE SRI Index. The study found that not all companies are conformed to the corporate governance best practices regarding the composition of the board and its committees.

M.Comm. (Financial Management) / Our planet is getting smaller and older because the population is growing by the second and our resources and means of sustaining life are getting depleted. Companies need to rethink their strategy and business models to do no harm to the environment and society. The board of directors, as custodians of corporate governance, are responsible to direct their corporations towards sustainability performance. This has implications for the manner in which the board act and organise themselves. This study explores whether the board characteristics of sustainability performing companies differs from non-performing companies in terms of the gender; ethnicity; age; affiliation and the background of the directors at specified points in time namely 2004, 2007 and 2010 and how these board characteristics evolved over the specified period. The results should contribute to obtaining an understanding of how boards in South Africa are organising themselves in practice to enhance the sustainability performance of their companies. A comparative analysis using cross sectional data found that companies embracing sustainability performance have significantly more directors with non-traditional backgrounds on their board. A trend analysis using longitudinal data found that sustainability performing as well as nonperforming companies is becoming more diverse. Findings from this study provides practical guidance to companies wishing to integrate sustainability into their governance structures in that companies should consider recruiting directors with non-traditional backgrounds.

M.Com. (Financial Management) / Electronic trading systems are increasingly implemented by stock exchanges instead of maintaining the traditional floor trading system. This study uses the Historical case study method to examine original minute book volumes from the archives of the Johannesburg Stock Exchange (JSE). The purpose of the study is to identify and examine the antecedents and consequences of the shift to an electronic trading system in the case of the JSE from 1989 to 2000. The study also produces an accurate historical account of the process that the JSE underwent to implement an electronic trading system, for use in further studies concerning the shift from floor to electronic trading. The main antecedents identified in the study were the JSE’s need to automate menial tasks; the need for increased trading capacity; the need for proper information dissemination; the need to dematerialise physical share certificates; international trends with regard to electronic trading; the T + 3 clearing and settlement standard; the establishment of South Africa’s National Payment System; legislative changes to the Securities Exchange Control Act; the need for market liquidity; and the need for investor protection. The main consequences of the abolishment of the floor trading system in favour of the electronic trading system were examined and grouped in four categories, namely the consequences for society, the consequences for the operation of the stock market, the consequences for the liquidity of the market, and the consequences for investor protection. The results of this study could be used as a foundation for a follow-up study to measure the effects of electronic trading implementation on the liquidity and efficiency of a stock market.

Magister Commercii - MCom / Motivated by the number of firms that migrate from the Alternative Exchange (AltX) to the JSE main board, this research undertakes to examine the role and the functions of the AltX and its contribution to the development of the small and medium-sized enterprises (SMMEs) in South Africa over the period from January 2004 to December 2015. This study seeks to explore the performance of the firms that have migrated from the AltX to the JSE main board, as well as the attributes that contribute to a successful migration. The study emerges by computing risk, return, risk-adjusted performance and liquidity statistics of the firms that migrated from the AltX to the JSE main board over the period of the research since their respective listings on the AltX. In the preliminary tests conducted in this study, the excess returns of the sample firms were regressed against the market risk premium using ALSI as the market proxy. It is discovered that the beta coefficients estimated by the regressions are statistically insignificant. This indicates that the firms listed on the AltX have insignificant correlation with the firms listed on the JSE main board. Therefore, the ALSI could not be used as a performance benchmark for the sample firms in this research. Subsequently, the research evaluates the market response before and after the announcement date and the actual migration date of the firms that have migrated from the AltX to the JSE main board. The reasons why this research investigates the impact of announcement and actual migration separately is due to the observation that the period between announcement date and migration date is usually more than a month and investors might have different reactions towards these two mentioned events. Moreover, this is the first research that has investigated the impact corporate reaction on both migration announcement date and the actual migration date of the firms from the AltX to the JSE main board. The results reveal that there are significant average abnormal returns and average abnormal turnovers reaction around migration announcement date/actual migration date. The findings suggest that both the migration announcement and actual migration of the firms from the AltX to the JSE main board have produced significant abnormal returns. Moreover, the research evaluates the performance of the firms that have migrated from the AltX to the JSE main board against their comparable peers. The performance evaluation is conducted in two folds. Firstly, the evaluation is conducted in order to assess the financial position of the AltX sample firms before their migration to the JSE main board. Secondly, the post migration performance evaluation is conducted in order to classify each of the sample firms either as a success or as a failure after their migration to the JSE main board. The results reveals that, out of 20 sample firms only 13 firms have been categorised as successful post their migration from the AltX to the JSE main board, while the remaining 7 firms are categorised as unsuccessful post migration. Finally, this research investigates the attributes that differentiate the AltX firms that are likely to be successful and those that are unlikely to be successful after their migration to the JSE main board. To achieve this, Multivariate Discriminant Analysis (MDA) model developed by Altman (1968) is employed. The results reveals that, the model is able to classify 90% of the original cases and 85% of the cross-validated cases perfectly. Moreover, the model has identified net profit margin, current ratio and return on capital invested as the most important financial ratios in distinguishing the successful firms from unsuccessful firms post migration from the AltX to the JSE main board. / 2021-04-30

Magister Commercii - MCom / Since the discovery of herding behaviour in financial markets in the 1990s, it has become an area of interest for many investors, practitioners and scholars. Herding behaviour occurs when investors and market participants trade in the same direction during the same time period, as a result of the influence of other investors. Studies on herding behaviour have been undertaken in both the developed and developing economies and majority of these studies have confirmed the existence of herding behaviour in the stock markets. Despite its tremendous growth, the South African financial markets are not immune to such market anomaly. Herding behaviour on the JSE was first investigated in 2002 focusing in the unit trust industry on the South African stock market. Motivated by this, this study assessed the presence of herding behaviour using the Johannesburg Securities Exchange tradable sector indices. Four indices were employed, namely Financials, Industrials and Resources and were benchmarked against the JSE All Share Index for the period from January 2007 to December 2017. The industrials index ((FINI15) constitutes of 25 largest industrial stocks by market capitalization, the financials index (FINI15) comprises of 15 largest financial stocks by market capitalization, the resources index (RESI10) which represents 10 largest resources stocks by market capitalization and lastly the FTSE/JSE All Share Index defined as a market capitalization-weighted index which is made up of 150 JSE listed companies and is the largest index in terms of size and overall value JSE. The FTSE/JSE All Share Index was used as a benchmark for investors to check how volatile an investment is. The South African economy experienced the effects of the 2008 global financial crisis from 01 July 2007 to 31 August 2009. This study split the examination period into three categories namely before the global financial crises which was the period starting from 1 January 2007 to 30 June 2007, then the period during the global financial crisis which was from 1 July 2007 to 31 August 2009 and lastly the period after the global financial crises which was from 1 September 2009 to 31 December 2017. Apart from the diversity of the indices, the length of the examination period also had a significant influence towards the magnitude of herding behaviour on the JSE.

Thesis (M.M. (Finance & Investment))--University of the Witwatersrand, Faculty of Commerce, Law and Management, Graduate School of Business Administration, 2013. / This study examined stock market reaction to annual earnings announcements using the most recent data from the Nairobi Securities Exchange (Kenya) and JSE Securities exchange (South Africa). The period of study is 1 January 2005, to 31 December, 2011. Using the event study methodology, the magnitude of market reaction to the earnings announcements for a sample of 261 listed firms on NSE and JSE is tested. Abnormal returns (ARs) were computed for each firm and tested how announcements impact a firms’ share price. The results show positive and significant returns on the announcement month for JSE, whereas the returns for NSE are negative and significant on the second month after announcement. In our study, JSE and NSE observed mean CAR of (+1.64%) and (-1.8606) respectively, suggesting that earnings contain important information for the market. We find that there is no post earnings announcement drift observed over the next six months after the announcement. The results are consistent with the efficient market hypothesis, thus suggesting that the Johannesburg securities exchange and Nairobi securities exchange are informationally efficient to earnings announcements by the sample of listed firms. Furthermore, our results show NSE firms performed better than JSE firms during the economic boom and meltdown, whereas JSE firms observed a good performance during the economic recession compared to NSE firms.

This paper provides an empirical analysis of the stock price behaviour of firms listed on the Johannesburg Securities Exchange (JSE) around corporate events relating to final cash dividend change announcements over the period 2004 to 2009. Declared for the financial year-end, final cash dividend announcements either represent an increase, a reduction or no change relative to the previous year’s announcement. In this paper we analyse the stock price behaviour of firms that announced dividend reductions before and during the Global Financial Crisis of 2007 (GFC 2007). The pre-crisis analysis focuses on dividend reduction effects on share price during normal economic times and crisis analysis focuses on effects during economic downturn. We refer to the pre and during crises effects as firm-specific and systemic effects respectively. Studies about the general effect of dividend announcements on shareholder value are well documented; however our study is motivated by the fact that there has not been an abundance of forthcoming research in South Africa pertaining to how share prices have reacted to dividend reductions before and during the GFC 2007. We employ an event study methodology in the context of this emerging market to assess the share price behaviour to dividend reductions. Integral to an event study methodology in the corporate context, is the analysis of abnormal performance around the event date. Abnormal performance is measured by employing three widely used quantitative approaches namely, the market-adjusted, market model and the buy-and-hold abnormal return approaches. Based on daily closing share price information collected from iNet Bridge database, abnormal performance is calculated from 2004 to 2009 while controlling for the contemporaneous effect of earnings announcements (earnings data collected from Bloomberg database) occurring within 10 trading days of dividend announcement. The analysis shows that the market reaction is not statistically significant on the announcement day and that more negative returns occur during the pre-crisis period. Volatility of abnormal returns is higher during the pre-crisis period. The research does not support the Irrelevance Theory but seems to support the signalling hypothesis.

One of the assumptions upon which modern portfolio theory is based is the efficient market hypothesis which postulates that market prices fully reflect all available information, which implies that an abnormal return cannot be made. Evidence has amassed in contradiction to the efficient market hypothesis as demonstrated by Jegadeesh and Titman (1993); Mohanram (2005); Montier (2009) and Piotroski, (2000). However these studies demonstrated earning an abnormal return by buying an asset as opposed to selling an asset. Evidence by Altman (2000) and Beneish, Lee and Nichols (2013) affirmed that abnormal returns may be earned by selling a declining asset. There has been no published work conducted on the South African market pertaining to an instrument that may be used to detect a decline in share price due to prior earnings manipulation, thereby providing the scope of this research. In recent years the focus of the discipline of asset pricing has shifted away from theoretical modelling towards empirical analysis. The C-score by Montier (2008) is a binary earnings manipulation detection model, designed to identify stocks that may be shorted for an abnormal return. An exploratory study of stocks on the Johannesburg Stock Exchange (JSE) from 2002 to 2010 was conducted. Vital focus areas included the resources and industrials sector. Results of this research prove that C-score is insufficient as a stand-alone tool for detecting shortable stocks on the JSE. Whilst negative relative returns were earned for certain holding periods of certain sectors, a consistent trend could not be isolated. / Dissertation (MBA)--University of Pretoria, 2013. / pagibs2014 / Gordon Institute of Business Science (GIBS) / MBA / Unrestricted

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.

Magister Commercii - MCom / A distinctive phenomenon on the JSE Securities Exchange (JSE) is the market segmentation between the resource sector and the financial and industrial sectors. Criticisms also arise from employing a capitalization-weighted (cap-weighted) index such as the ALSI index when the market is less than perfectly efficient. A study conducted by Vardharah and Fabozzi (2007) also suggests that a correlation exists between sector allocation decisions and the investment styles inherent in portfolios. The uniqueness of the South African stock market is that it is dominated by three major sectors, namely, the financial sector, the industrial sector and the resources sector. The goal of this research is to examine the application of sector influences on the JSE over the examination period 1 January 2003 to 31 December 2013. It is the contention that the cap-weighted ALSI index is price-sensitive and potentially mean-variance inefficient. The study therefore attempts to evaluate the relative meanvariance efficiency of alternative sector allocation strategies versus the cap-weighted ALSI as the optimal risky portfolio on the JSE. Two optimal long-only portfolios that maximises the Sharpe ratio are constructed and compared to the market proxy on the JSE over the examination period from 1 January 2003 to 31 December 2013. A longonly portfolio that comprises the JSE tradable sector indices and includes a cash allocation (risk-free proxy) and a long-only portfolio exclusive of the cash allocation are constructed. The research extends to cross-examine the inter-relationship between sector returns and the investment styles on the JSE using the Carhart (1997) four-factor model. The research further reexamines and updates the market segmentation phenomenon over the extended examination period from 1 January 2003 to 31 December 2013. The practicality of two sector-based multifactor APT models are examined and compared to the single-factor CAPM to determine which of the asset pricing models better explain JSE equity returns. A sector-based two-factor APT model proposed by Van Rensburg (2002) using the JSE sector indices FNDI and RESI as the sector proxies is reexamined and a sector-based three-factor APT model using the JSE tradable sector indices FINI, INDI and RESI as the sector proxies is explored. The optimal long-only portfolio with the cash allocation is found to offer the best meanvariance efficient allocation and the ALSI index represents the most mean-variance inefficient portfolio. The resource sector is found to be the worst performing sector and significantly influences the performance of ALSI. In terms of the style risk influences, the financial sector has a strong value bias and the industrial sector has a moderate value bias, small cap bias and a momentum bias. The resource sector, for the most part, is influenced by growth stocks and has a contrarian tilt. It is also found that the market segmentation phenomenon continues to exist on the JSE. Although the explanatory power of the three-factor APT model and the two-factor APT model is similar, the distinct advantage of the three-factor APT model is that systematic risks could be observed more closely by separating FINI and INDI in the asset pricing model.