M.Comm. (Financial Management) / Since the late 1990s South African companies have started to dual list their shares in different countries, mainly to source capital from larger and more developed economies. In addition to this the level of participation by foreigners in the buying and selling of South African shares has increased. This leads to the question: should a local or a global CAPM (capital asset pricing model) be used to value shares that are traded in integrated global capital markets? This study focuses on dual-listed South African shares as these shares are most likely to be traded by investors globally. This study replicated aspects of earlier studies conducted in the Unites States of America and the United Kingdom, which are developed economies. By applying the same principles within a South African context, valuable insights might be derived relating to companies from developing economies. The main purpose of this study is to investigate the impact of using a global CAPM instead of a local CAPM to determine the cost of equity of South African companies. To this end, a sample of 26 dual-listed South African companies was selected using non-probability judgement sampling. Descriptive research was undertaken using quantitative analysis of secondary data. The cost of equity using the local and global CAPM was calculated for each of the selected dual-listed South African companies. The historical monthly returns of the dual-listed shares as well as each of the local and global risk factors during the period from 1 January 2005 to 31 December 2009 were used to calculate the local and global beta coefficients. The estimates of the local and global cost of equity were compared to ascertain whether there were significant differences for individual shares, as well as across different market sectors. While the results from similar previous studies on shares of developed countries by Koedijk and van Dijk (2004:474); Koedijk et al (2002:911); and Mishra and O‟Brien (2001:28) indicated insignificant differences between the local and global CAPM, this study indicated differences of 400 basis points and above for the sample of dual-listed South African companies. The findings in this study therefore suggest that the findings from studies conducted in developed economies cannot be generalised for companies in developing economies. In the South African market, shares across different sectors behave differently towards global risk factors; therefore this study highlighted the need for financial analysts to carefully consider using the global CAPM instead of the local CAPM when valuing shares that are traded in globally integrated capital markets. Using the incorrect cost of equity may result in incorrectly valuing a company as well as incorrect decision making.

This research study is aimed at finding empirical evidence to support a finding from an initial study that corporate governance disclosure is linked with financial performance for JSE listed companies. The study made use of a scorecard previously designed for the initial study to rate the governance disclosure of the various companies. 74 companies from the eight major sectors of the JSE were selected for the sample and financial data for the review period was extracted from MacGregor BFA. Governance was rated based on annual reports and any other information within the public domain. The financial performance measures used were, CAGR using opening and closing share prices, price to book and price/earnings ratio. Using mean disclosure scores, two portfolios were created to compare financial performance, the high and low disclosure portfolios. A simple correlation analysis was then conducted to assess the relationship of governance disclosure with the three different financial measures. The findings indicate a negative correlation between governance disclosure and returns whilst a positive correlat ion is established between governance and firm valuations. Copyright / Dissertation (MBA)--University of Pretoria, 2010. / Gordon Institute of Business Science (GIBS) / unrestricted

The thesis examines the efficacy of the provisions of Saudi Company Law 1965 in terms of protecting the rights of minority shareholders in joint stock companies (JSCs). The aim is to assess the effectiveness of the current form of SCL 1965 in this regard and to suggest a reform scheme. This research finds that SCL 1965 does not adequately provide minority shareholders with all the rights that they should enjoy. Accordingly, minority shareholders are often subject to the controlling influence of majority shareholders, who are generally in charge of the company’s management. As a result, minority shareholders either do not exercise or do not enjoy certain rights, and they therefore forfeit their natural and intended role under this law, which is to oversee and control the activities of the board of the company, and in so doing to defend their interests. Despite the Saudi government intentions to conduct a range of reforms, particularly in the field of trade, SCL 1965 has not been modified to any significant degree; it is still not sufficiently effective, and does not address many important points relating to shareholders’ rights in listed companies. Therefore, there are important decisions that need to be made on the part of the Saudi legislature in terms of improving the investment environment in KSA, including improving the level of protection for investors in JSCs; these decisions will help to attract more investors into the Saudi financial market. This thesis suggests ways in which to improve the level of protection for minority shareholders in Saudi listed companies against any encroachment on their interests within the company. In this respect, it suggests recasting the provisions relating to minority shareholders, especially SCL 1965.

Nesta dissertação entende-se Governança Corporativa como um conjunto de práticas empresariais potencialmente relacionadas com o desempenho operacional e o desempenho frente ao mercado de capitais, seguindo estudos que têm sugerido essa relação. A pesquisa se propôs a investigar, no caso das companhias abertas brasileiras, a significância do pertencimento aos segmentos diferenciados de listagem da Bolsa de Valores do Estado de São Paulo (BM&FBOVESPA) sobre os indicadores de resultado operacional das empresas listadas no Brasil, mais especificamente em relação aos retornos sobre ativos (ROA) e sobre patrimônio líquido (ROE), e a outros indicadores lastreados no lucro antes de juros e impostos (EBIT) e no lucro antes de juros, impostos, depreciação e amortização (EBITDA). Empregaram-se, aqui, métodos quantitativos em um modelo de regressão linear. O trabalho teve como referência principal o artigo de Brown e Caylor (Corporate Governance and Firm Operating Performance, 2009). Os resultados foram mistos e inconclusos em termos de significância, ao modelar ROA, ROE e indicadores baseados em EBIT e EBITDA, contra os segmentos de listagem, mesmo empregando variáveis de controle como o valor de mercado, a razão entre o patrimônio líquido e o valor de mercado, e o endividamento das empresas. Recomenda-se, assim, para estudos futuros, aprofundar a análise e a determinação das variáveis de controle, além de buscar atenuar as limitações devidas à endogeneidade e à causalidade reversa, pelo uso de variáveis instrumentais, e pelo emprego de métodos econométricos mais robustos, como equações estruturais. / In this research, we understand corporate governance as a set of corporate practices potentially related to the operational performance and to the capital market performance of the firm, following several studies that have suggested such a relationship. The research intended to investigate whether there is a significant relationship between the listing in BM&FBOVESPA’s higher corporate governance segments, and the operational indicators of listed Brazilian companies, more specifically, return on assets (ROA) and return on equity (ROE), as well as other earnings before interest and taxes (EBIT) and earnings before interest, taxes, depreciation and amortization (EBITDA) related indicators. Quantitative methods – linear regressions – were employed. The main reference for the research was Brown and Caylor’s article (Corporate Governance and Firm Operating Performance, 2009). The results were mixed and not conclusive in terms of significance, when modeling ROA, ROE and the other performance indicators in relation to the listing segments, despite market value, equity divided by market value, and debt to equity ratio as control variables. The study recommends future deeper analyses and selection of control variables, as well as addressing endogeneity and reverse causality limitations through the use of instrumental variables, and more robust econometric models such as structural equations modeling (SEM).

Over the past two decades a number of Chinese companies have issued shares on both the Hong Kong Stock Exchange and on one of the Chinese stock exchanges. The Hong Kong-listed H-shares of Chinese dual-listed companies have traded at a persistent discount rate relative to the China-listed A-shares. As these shares represent the same ownership rights and cash flows, the shares should theoretically trade at the same price. The price differential between H-shares and A-shares should decrease as international markets continue to converge. The paper analyzes the persistence of the discount rates and the effects of both market and investor sentiment on the price disparity between the two shares. The paper also examines whether certain sectors consistently trade at larger discount rates relative to others.

Business valuations have been an integral part of business for many years, and will stay an important part of business, as valuations are required for multiple reasons. The majority of businesses in South Africa (and the rest of the world) consist of privately-owned companies. A business valuation in general is a complex exercise that can be described as an inexact science. When the business valuation of a privately-owned company is added to the equation, the level of uncertainty is increased with another notch. The valuations of privately-owned companies are therefore a relevant topic. As unsystematic risk in privately-owned companies is difficult to eliminate or mitigate by diversification, this study sets the goal to determine if the advisory departments of the big four audit, tax and advisory firms in South Africa (Ernst & Young, PwC, KPMG and Deloitte & Touch) consider and incorporate unsystematic risk into valuations of privately-owned companies and if it is taken into account, whether it is done objectively. This study firstly focussed on the literature of privately-owned company valuations. The most frequently used approaches are found to be the market approach and the income approach. The asset approach is used to determine the minimum value of a company (the liquidation value). The topic of unsystematic risk is perceived as very much subjective and therefore receptive of manipulation. The second part of the study uses the mixed method approach to collect empirical data, using survey questionnaires and follow-up interviews (which are based on the literature review). It was found that the preferred valuation approaches used by the participants are indeed the income approach followed by the market approach. It seems that these two approaches are used in conjunction with one another. Incorporating unsystematic risk is done in line with what the literature proposes, but as professional judgement is needed, the process is never entirely objective. Participants tend to agree that the identification and quantification of unsystematic risk are not entirely objective and that it is possible to use unsystematic risk as a device to bring the final results of a valuation in line with the clients‟ objective. This study recommends that a professional valuation body should be formed to regulate valuations in South Africa. This body should set valuation standards. It is furthermore recommended that the asset approach is used as a reasonableness test when going concern companies are valued, and to consider the use of CAPM variants (e.g. modified CAPM, the local CAPM, the Build-up method etc.) and non-CAPM variants (Estrada model and the EHV model) to determine the cost of equity when the income approach is followed, as is suggested by the literature. The practical implication of the study is that the research can be used as starting point by role-players in the valuations sector to open the discussion on the topic formally so that valuation practitioners can engage with one another and work towards a professional valuation body and valuation standards. The limitations of the study are that only top-level employees were used as the representatives of firms and the population only includes the big four audit, advisory and taxation firms. Areas for further research include extending the population to three strata, viz. big four firms, medium-sized firms and small-sized firms. Comparative valuations on a case study can be performed by the different approaches of each stratum using unsystematic risk as the only variable (if themes are identified in strata). Conclusions can be made based on the outcomes of the valuations to determine the impact when different approaches are followed. / Thesis (M.Com. (Management Accountancy))--North-West University, Potchefstroom Campus, 2012.

Business valuations have been an integral part of business for many years, and will stay an important part of business, as valuations are required for multiple reasons. The majority of businesses in South Africa (and the rest of the world) consist of privately-owned companies. A business valuation in general is a complex exercise that can be described as an inexact science. When the business valuation of a privately-owned company is added to the equation, the level of uncertainty is increased with another notch. The valuations of privately-owned companies are therefore a relevant topic. As unsystematic risk in privately-owned companies is difficult to eliminate or mitigate by diversification, this study sets the goal to determine if the advisory departments of the big four audit, tax and advisory firms in South Africa (Ernst & Young, PwC, KPMG and Deloitte & Touch) consider and incorporate unsystematic risk into valuations of privately-owned companies and if it is taken into account, whether it is done objectively. This study firstly focussed on the literature of privately-owned company valuations. The most frequently used approaches are found to be the market approach and the income approach. The asset approach is used to determine the minimum value of a company (the liquidation value). The topic of unsystematic risk is perceived as very much subjective and therefore receptive of manipulation. The second part of the study uses the mixed method approach to collect empirical data, using survey questionnaires and follow-up interviews (which are based on the literature review). It was found that the preferred valuation approaches used by the participants are indeed the income approach followed by the market approach. It seems that these two approaches are used in conjunction with one another. Incorporating unsystematic risk is done in line with what the literature proposes, but as professional judgement is needed, the process is never entirely objective. Participants tend to agree that the identification and quantification of unsystematic risk are not entirely objective and that it is possible to use unsystematic risk as a device to bring the final results of a valuation in line with the clients‟ objective. This study recommends that a professional valuation body should be formed to regulate valuations in South Africa. This body should set valuation standards. It is furthermore recommended that the asset approach is used as a reasonableness test when going concern companies are valued, and to consider the use of CAPM variants (e.g. modified CAPM, the local CAPM, the Build-up method etc.) and non-CAPM variants (Estrada model and the EHV model) to determine the cost of equity when the income approach is followed, as is suggested by the literature. The practical implication of the study is that the research can be used as starting point by role-players in the valuations sector to open the discussion on the topic formally so that valuation practitioners can engage with one another and work towards a professional valuation body and valuation standards. The limitations of the study are that only top-level employees were used as the representatives of firms and the population only includes the big four audit, advisory and taxation firms. Areas for further research include extending the population to three strata, viz. big four firms, medium-sized firms and small-sized firms. Comparative valuations on a case study can be performed by the different approaches of each stratum using unsystematic risk as the only variable (if themes are identified in strata). Conclusions can be made based on the outcomes of the valuations to determine the impact when different approaches are followed. / Thesis (M.Com. (Management Accountancy))--North-West University, Potchefstroom Campus, 2012.

Concentrated corporate ownership prevails in most countries, so the relationship between controlling shareholders and minority shareholders is an important principle-agent problem. Tunnelling, the transfer of assets and profit for the benefit of controlling owners, is the most important way of expropriating small shareholders. While tunnelling is rampant in emerging economies and even some developed countries, related research lacks convincing evidence. On the other hand, large shareholders sometimes use private funds to prop up firms in financial distress. Although there is plenty of anecdotal and indirect evidence on propping, it lacks direct large-sample examination. This study presents a pooled cross-sectional analysis of 4373 publicly listed companies in China between 2001 and 2004. The analysis not only examines the effects of various variables on the exploitation of related party transactions by controlling owners for tunnelling and propping, and also investigates the effects of tunnelling and propping on firm performance and valuation. The study reveals that the presence of controlling shareholders and higher control rights lead to higher levels of tunnelling. Conversely the existence of other large shareholders reduces the magnitude of tunnelling. In addition, the study shows that pyramidal-controlled firms and firms owned by the State display more incidences of tunnelling. When firms have better investment opportunity, however, their controlling shareholders tend to divert fewer funds for their private gains. It is also found that controlling shareholders offer funds to financially stricken firms under their control. This is the first study that finds direct evidence on the occurrence of propping although not all badly-performing firms are propped up. / While tunnelling negatively affects operating performance and firm valuation, propping has a positive effect on firm valuation. The occurrence and magnitude of tunnelling is greater than that of propping. Propping only occurs to partial firms in financial distress, yet there is no improvement in those firms’ performance. As propping from new controlling owners is more a way of back-door listing, they tend to engage in tunnelling when their control is secure. In short, when legal protection of minority shareholders is weak, controlling owners tend to tunnel for private benefit. Hence policymakers and regulators must recognise that to eliminate widespread expropriation, the establishment of strong corporate governance in well-functioning institutions and strong legal enforcement is important. Lower levels of tunnelling in years 2003 and 2004 justify the positive effect of stringent regulation. Yet, more needs to be undertaken beyond the legal and regulatory level such as an allowance for diversified corporate ownership and the transformation of non-floatable shares to be floated on the exchange to align interests of large and minority shareholders.

Nesta dissertação entende-se Governança Corporativa como um conjunto de práticas empresariais potencialmente relacionadas com o desempenho operacional e o desempenho frente ao mercado de capitais, seguindo estudos que têm sugerido essa relação. A pesquisa se propôs a investigar, no caso das companhias abertas brasileiras, a significância do pertencimento aos segmentos diferenciados de listagem da Bolsa de Valores do Estado de São Paulo (BM&FBOVESPA) sobre os indicadores de resultado operacional das empresas listadas no Brasil, mais especificamente em relação aos retornos sobre ativos (ROA) e sobre patrimônio líquido (ROE), e a outros indicadores lastreados no lucro antes de juros e impostos (EBIT) e no lucro antes de juros, impostos, depreciação e amortização (EBITDA). Empregaram-se, aqui, métodos quantitativos em um modelo de regressão linear. O trabalho teve como referência principal o artigo de Brown e Caylor (Corporate Governance and Firm Operating Performance, 2009). Os resultados foram mistos e inconclusos em termos de significância, ao modelar ROA, ROE e indicadores baseados em EBIT e EBITDA, contra os segmentos de listagem, mesmo empregando variáveis de controle como o valor de mercado, a razão entre o patrimônio líquido e o valor de mercado, e o endividamento das empresas. Recomenda-se, assim, para estudos futuros, aprofundar a análise e a determinação das variáveis de controle, além de buscar atenuar as limitações devidas à endogeneidade e à causalidade reversa, pelo uso de variáveis instrumentais, e pelo emprego de métodos econométricos mais robustos, como equações estruturais. / In this research, we understand corporate governance as a set of corporate practices potentially related to the operational performance and to the capital market performance of the firm, following several studies that have suggested such a relationship. The research intended to investigate whether there is a significant relationship between the listing in BM&FBOVESPA’s higher corporate governance segments, and the operational indicators of listed Brazilian companies, more specifically, return on assets (ROA) and return on equity (ROE), as well as other earnings before interest and taxes (EBIT) and earnings before interest, taxes, depreciation and amortization (EBITDA) related indicators. Quantitative methods – linear regressions – were employed. The main reference for the research was Brown and Caylor’s article (Corporate Governance and Firm Operating Performance, 2009). The results were mixed and not conclusive in terms of significance, when modeling ROA, ROE and the other performance indicators in relation to the listing segments, despite market value, equity divided by market value, and debt to equity ratio as control variables. The study recommends future deeper analyses and selection of control variables, as well as addressing endogeneity and reverse causality limitations through the use of instrumental variables, and more robust econometric models such as structural equations modeling (SEM).

Nesta dissertação entende-se Governança Corporativa como um conjunto de práticas empresariais potencialmente relacionadas com o desempenho operacional e o desempenho frente ao mercado de capitais, seguindo estudos que têm sugerido essa relação. A pesquisa se propôs a investigar, no caso das companhias abertas brasileiras, a significância do pertencimento aos segmentos diferenciados de listagem da Bolsa de Valores do Estado de São Paulo (BM&FBOVESPA) sobre os indicadores de resultado operacional das empresas listadas no Brasil, mais especificamente em relação aos retornos sobre ativos (ROA) e sobre patrimônio líquido (ROE), e a outros indicadores lastreados no lucro antes de juros e impostos (EBIT) e no lucro antes de juros, impostos, depreciação e amortização (EBITDA). Empregaram-se, aqui, métodos quantitativos em um modelo de regressão linear. O trabalho teve como referência principal o artigo de Brown e Caylor (Corporate Governance and Firm Operating Performance, 2009). Os resultados foram mistos e inconclusos em termos de significância, ao modelar ROA, ROE e indicadores baseados em EBIT e EBITDA, contra os segmentos de listagem, mesmo empregando variáveis de controle como o valor de mercado, a razão entre o patrimônio líquido e o valor de mercado, e o endividamento das empresas. Recomenda-se, assim, para estudos futuros, aprofundar a análise e a determinação das variáveis de controle, além de buscar atenuar as limitações devidas à endogeneidade e à causalidade reversa, pelo uso de variáveis instrumentais, e pelo emprego de métodos econométricos mais robustos, como equações estruturais. / In this research, we understand corporate governance as a set of corporate practices potentially related to the operational performance and to the capital market performance of the firm, following several studies that have suggested such a relationship. The research intended to investigate whether there is a significant relationship between the listing in BM&FBOVESPA’s higher corporate governance segments, and the operational indicators of listed Brazilian companies, more specifically, return on assets (ROA) and return on equity (ROE), as well as other earnings before interest and taxes (EBIT) and earnings before interest, taxes, depreciation and amortization (EBITDA) related indicators. Quantitative methods – linear regressions – were employed. The main reference for the research was Brown and Caylor’s article (Corporate Governance and Firm Operating Performance, 2009). The results were mixed and not conclusive in terms of significance, when modeling ROA, ROE and the other performance indicators in relation to the listing segments, despite market value, equity divided by market value, and debt to equity ratio as control variables. The study recommends future deeper analyses and selection of control variables, as well as addressing endogeneity and reverse causality limitations through the use of instrumental variables, and more robust econometric models such as structural equations modeling (SEM).