Theses and Dissertations (Financial Management)

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Behavioural factor investing in the South African equity market
Bennetts , Luke (University of Pretoria, 2024)
Periods of heightened market volatility test the robustness of investment strategies and investor behaviour. This study examines the performance and downside resilience of behavioural factor-based portfolios on the Johannesburg Stock Exchange (JSE) during turbulent market conditions, including the COVID-19 pandemic and the subsequent monetary tightening cycle. Two behavioural portfolios, the Cognitive Investment Portfolio (CIP) and the Ethical Decision-Making Portfolio (EDMP), are constructed using environmental, social, and governance (ESG) metrics as proxies for cognitive and expressive investor preferences. Their performance is evaluated relative to traditional factor-based portfolios using rolling five-year return windows over the period 2010 to 2022. Employing a quantitative research design, the study applies descriptive statistics, volatility and downside-risk measures, and rolling-return analysis to assess relative portfolio performance, stability, and resilience across market fluctuations. The results indicate that while behavioural portfolios generated returns broadly comparable to traditional factor strategies, they exhibited lower volatility, reduced drawdowns, and more favourable tail-risk characteristics during periods of market stress. In particular, the CIP demonstrated improved resilience in rolling periods that include the COVID-19 shock, while the EDMP displayed comparatively stable performance across both pre- and post-pandemic environments. These findings suggest that incorporating behavioural and ethical considerations into portfolio construction can improve portfolio stability and downside protection without materially sacrificing long-term returns. The study contributes to the behavioural finance and factor-investing literature by providing emerging-market evidence that behavioural factor-based portfolios can complement traditional investment strategies, with particular relevance for long-term investors operating in volatile market environments.
The utilisation of tax-free savings accounts: a South African perspective
Vermeulen, Katinka (University of Pretoria, 2025-06-26)
Tax-free savings accounts (TFSAs) were introduced in South Africa on 1 March 2015 to incentivise additional household savings. At the time, the National Treasury stated its intention of attracting savings from lower- and moderate-income taxpayers in the country. Yet, South Africa’s poor savings culture has remained a policy concern, and little has been known about the utilisation of TFSAs in South Africa, making it difficult to determine the role of TFSAs, if any, in improving the savings culture of South Africans. The thesis explored the utilisation of TFSAs in South Africa, arguing the suitability of the savings vehicle for retirement and education savings in particular. The study set out to identify the factors associated with TFSA participation, establish whether South African TFSAs were used as intended by the National Treasury’s design of the vehicle and determine the purposes for which TFSAs were used domestically. A structured questionnaire, completed by 319 adult South African respondents, assessed the socio-demographic characteristics of the respondents, the respondents’ savings goals, the extent to which mental accounting was applied, their level of financial risk tolerance, financial literacy and knowledge, as well as the respondents’ utilisation of TFSAs. A quantitative research design was employed to analyse the survey data. First, binary logistic regression was used to identify factors predicting the odds of TFSA participation. In addition, chi-squared automatic interaction detection (CHAID) decision tree modelling was employed to form profiled segments of individuals who participated in TFSAs. Where respondents indicated that they did not have a TFSA, reasons for not having a TFSA were explored. Hierarchical multiple linear regression analysis was then used to determine the variables associated with the extent of TFSA participation. To establish the degree to which respondents’ utilisation of TFSAs aligned with its intended use, latent class analysis and subsequent ANOVA analyses were conducted. The purpose of use was explored through additional descriptive statistics, cross-tabulations and ANOVA analyses. Both the binary logistic regression and CHAID highlighted individuals’ financial risk tolerance level as well as variables related to the extent to which respondents applied mental accounting as statistically significant determinants of TFSA participation. Individuals who were willing to take some degree of financial risk were more likely to invest in TFSAs than those who were not. Additionally, individuals who defined and quantified their savings goals and applied broad choice bracketing were more prone to have a TFSA. Conversely, those who treated windfall money differently from regular income were less likely to have a TFSA. Regarding the magnitude of the TFSA investment, the results offered evidence that the vehicle might not be as accessible as originally intended. Greater contributions to TFSAs were associated with being older, having a higher take-home salary, greater perceived adequacy of education savings, higher levels of financial literacy and knowledge, not receiving financial advice from an advisor, and having a smaller household. Three clear latent classes emerged from the latent class analysis. While most of the respondents used, or partially used, TFSAs as intended by the vehicle’s design, a large portion of the respondents did not use the savings vehicle as intended. The results suggested that these individuals might not have the financial resources to use TFSAs as intended. Furthermore, most respondents used their TFSAs to save for retirement and primarily contributed to their own TFSAs. Although it is encouraging that most respondents used their TFSAs to save for long-term goals, their behaviour indicated that TFSAs were not consistently used as intended by its design. The findings suggest that contrary to the government’s intent, utilisation of TFSAs may be income- and wealth-driven. The results of the study may be of value to individuals, financial advisors, policymakers, product providers and academics. The research findings could contribute to the design of policies and regulations relating to TFSAs, the development of TFSA products, marketing efforts in response to the research findings and direct suggestions for future academic research in this area.
Behavioural factors related to individual investment decisions in South Africa
Raiva, Tafadzwa (University of Pretoria, 2026-10-23)
This study sought to explore the behavioural factors influencing risk-return awareness in individual investor decision-making on the JSE. The factors under examination included overconfidence, herding, anchoring, and availability. Additionally, the study investigated risk tolerance and its relationship with investor decision-making. A Likert-type survey, hosted on Qualtrics, was designed and distributed to potential participants who were active investors on the JSE. With 301 participants, the survey achieved a 79% response rate. The survey included items addressing demographics, behavioural factors, financial risk tolerance, and risk-return awareness. The results were analysed using SPSS software, employing descriptive statistics to examine the distribution of responses (e.g., mean, median) and SEM to investigate relationships between study variables. Additionally, CHAID decision tree analysis was utilised to further explore group-splitting variables through chi-squared tests. SEM results indicated a significant positive relationship between 2 of the independent variables (anchoring and risk tolerance) and risk return awareness. Meanwhile, CHAID decision tree analysis revealed that investors with the highest risk return awareness were those prone to both anchoring and availability behavioural biases. The study is limited by the use of self‑reported data and the reduced reliability of certain behavioural‑bias scales .This research has therefore shed some light on the complexities of investor decision-making in South Africa, a topic not previously explored in this context. The researcher hopes this study highlights the intricate interplay between behavioural factors, risk tolerance, and risk return awareness, moving beyond the traditional approach of examining one bias at a time without considering the interaction of various factors in investor decision-making. From a practical and policy recommendations perspective, the findings suggest that investor‑education programmes should focus on improving awareness of cognitive biases, particularly anchoring and availability, to enhance decision‑making quality and long‑term financial outcomes.
Business intelligence and analytics : how management accountants can create business value
Kirsten, Elize (University of Pretoria, 2025-10-31)
The modern business environment is characterised by exponential technological innovation and development. Organisations increasingly rely on Big Data and Business Intelligence and Analytics (BI&A) to enhance decision-making and create competitive advantage. Leveraging Big Data successfully requires substantial investment in data infrastructure and analytic technologies. However, many firms struggle to realise value from such investment. This study argues that management accountants can bridge this gap by using BI&A effectively in enacting their evolving role as business partners, thereby creating value. The study investigated how management accountants can use BI&A to create value through improved decision-making, thereby contributing to sustained competitive advantage. Drawing on the resource-based view theory, the study adopted a two-phase mixed-methods approach. Phase 1 used a qualitative approach, namely semi-structured interviews with management accountants and business managers, to identify current practices, challenges, and opportunities in BI&A use in management accounting. Phase 2 involved an international survey on management accountants. The data were analysed using structural equation modelling (SEM) to test hypotheses developed from the literature and the qualitative findings from Phase 1. The results show that although the role of management accountants is evolving toward that of business partners, traditional reporting tasks remain prevalent. BI&A is most commonly applied in budgeting, forecasting, and performance evaluation, and descriptive analytics are dominating current use. However, management accountants aspire to expand BI&A use to predictive and prescriptive analytics and advanced data visualisation. Significant positive relationships were found between data-driven organisational cultures, the use of BI&A (particularly data analytics and visualisation), and value creation in decision-making. Both company-related and individual-related enabling factors were found to be significant predictors of BI&A use, but management accountants’ skills and formal data analytics training moderate these relationships. The study contributes to a growing body of knowledge linking BI&A with management accounting by providing an empirically validated model of how management accountants can create value through BI&A. Their ability to deliver strategic, actionable information from Big Data is crucial for organisational performance and competitive advantage, as they evolve from traditional ‘bean-counters’ to value-adding business partners by growing their use of BI&A. The results highlight the importance of aligning BI&A initiatives with organisational strategy, fostering a data-driven culture, and continuously developing analytical and communication skills. The findings have practical implications for organisations that seek to maximise value from BI&A investments, and for educators and professional bodies that aim to prepare management accountants for their evolving roles as business partners in the digital era.
Purchasing power parity in African countries : linear versus non-linear unit root tests
Janz, Zuzitzka (University of Pretoria, 2024-11)
This study investigated the validity of purchasing power parity (PPP) in 40 African countries by comparing the results of linear and non-linear unit root tests applied to the real effective exchange rates. Using a comprehensive dataset spanning from 1992 to 2024, the research addressed the “PPP puzzle” in African economies characterised by rapid growth and unique exchange rate dynamics. The study employed traditional linear tests alongside advanced non-linear tests to account for non-linearities, quantiles, and external covariates. Results indicated that linear tests identified stationarity consistent with PPP in only a limited number of countries, whereas non-linear tests, particularly the quantile non-linear unit root test with stationary covariates, detected stationarity in a significantly larger number of countries and across various quantiles. These findings suggest that advanced econometric techniques that incorporate quantiles and covariates provide a deeper understanding of exchange rate dynamics and PPP theory in African countries and offer valuable insights for policymakers, economists, and investors to better understand and forecast exchange rate behaviours in these dynamic markets.
Professional trait scepticism and behavioural bias in decision-making by financial professionals
De Klerk, Charisa (University of Pretoria, 2024-04)
Professional scepticism has received attention from various stakeholders, such as policy-makers, regulators, practitioners, and the public, in the last few years. This interest was driven by various negative events which have been attributed to financial professionals’ failure to apply professional scepticism. Such incidents have damaged the reputation of the finance profession. This study investigates the relationship between the trait of professional scepticism and decision-making biases. It further examines how possible determinants, such as gender, age, experience, and personality traits, could play a role in financial professionals’ susceptibility to decision-making biases. The study adopted an empirical research design, using a quantitative data analysis approach. Data were collected primarily through questionnaires distributed to financial professionals accredited by the International Auditing and Assurance Board (IAASB) or the Association of Chartered Certified Accountants (ACCA). Advanced statistical techniques, including structural equation modelling (SEM), were used to explore the relationship between the trait of professional scepticism and decision-making biases. The findings show the presence to a significant extent among financial professionals of confirmation bias, misconceptions of regression to the mean bias, conjunctive event bias, overconfidence bias, and affect bias. There was no significant relationship between the trait of professional scepticism and these biases. However, specific constructs within the trait of professional scepticism (such as a questioning mind, suspension of judgement, the search for knowledge, and self-determining) displayed significant positive (and in some instances negative) relationships with these biases. The results reveal that determinants such as gender, experience, and personality traits (such as extraversion and neuroticism) lead to both higher and lower susceptibility to certain decision-making biases among financial professionals. The present study contributes to the literature by providing evidence of the behavioural manifestation of the relationship between the trait of professional scepticism constructs and decision-making biases. These findings shed light on the effectiveness of some constructs of the trait of professional scepticism in making financial professionals less susceptible to decision-making biases. Conversely, instances were also identified where certain constructs could potentially aggravate decision-making biases. The findings offer valuable insights for policy-makers, regulators, and professional bodies such as the IAASB and the ACCA, emphasising the need for a comprehensive understanding of professional scepticism and its possible implications for decision-makers in the finance profession.
The influence of financial and non-financial sustainability on firm performance
Coetzee, Rholé (University of Pretoria, 2023-10-31)
The importance of the synergy between a firm’s financial and non-financial sustainability performance is becoming increasingly crucial due to the shift towards enhancing its financial and non-financial performance. The synergy involves maximising profit, enhancing companies’ reputations, fulfilling their social responsibility, and fostering a corporate culture of integrity and competence. Both the financial and non-financial dimensions of sustainability performance play pivotal roles in creating value for firms. In this study, the financial sustainability performance dimension encompassed three elements, namely growth opportunities, operational efficiency and innovation capabilities, measured using market to book value of equity, return on equity and research and development respectively. Similarly, the non-financial sustainability performance dimension consisted of three elements, namely environmental, social and governance, measured using the performance scores from the well-known Refinitiv Eikon database. This study adopted a multi-theoretic model to acknowledge the contributions of both financial and non-financial sustainability performance in creating an overall performance framework for firms. This approach integrated shareholder wealth maximisation theory, stakeholder theory, resource dependence theory and organisational legitimacy theory. The study investigated the relationships between financial and non-financial sustainability performance and firm performance, measured using five proxies of measurement, namely Tobin’s Q, total shareholder return, weighted average cost of capital, market value added and economic value added. A deeper understanding of these relationships was obtained by considering the interaction effects among the three elements within each dimension of sustainability performance, demonstrating their potential to enhance firm performance. To analyse the data, the estimated generalised least squares (EGLS) method was applied to the regression model, with period seemingly unrelated regression weightings and using White (diagonal) standard errors and covariance estimation methods. Therefore, the problems associated with autocorrelation and heteroscedasticity were mitigated. Regression analyses were conducted on the data for each of the five dependent variables representing firm performance. In addition to the regression analyses, the change in variance contribution of each independent variable was examined to identify the variable that explained the largest percentage of variation of the dependent variable in the regression models. Interaction terms were then introduced to the regression models to account for the overall interaction between financial and non-financial sustainability performance, as well as the interaction between individual elements within each dimension. This analysis covered a full sample of firms listed on the Johannesburg Stock Exchange from 2011 to 2021. The results of the study indicated that the performance of a firm was most profoundly influenced by its financial sustainability performance. On its own, non-financial sustainability performance did not exert a significant influence on firm performance. The combined influence of financial and non-financial sustainability suggested that the pursuit of non financial sustainability efforts could potentially detract from firm performance because these efforts involved reallocating funds from shareholders to other stakeholders. However, the effects of non-financial sustainability initiatives became more evident when they interacted with financial sustainability performance.
The impact of news on the South African sovereign bond market
Van der Westhuizen, Elizabeth-Ann (University of Pretoria, 2022)
A reverse event study approach is used to investigate how the South African sovereign bond yield curve react to headline news. Abnormal return dates in the zero-coupon yields are identified using GARCH models on the daily return series and news items that are classified into categories using supervised machine learning. A regression model is fitted to determine the link between the abnormal daily returns and news categories. The results indicate that for abnormal increases in returns, indicating an increase in yield (negative news) the entire yield curve was impacted by political news and the medium term (5-year) was also impacted by international news. For abnormal decreases in returns, indicating a decrease in yields (positive news) political news had the greatest impact on the long end (15-and 20-year) of the yield curve, and economic news had the greatest impact on the medium term (10-year).
Performance persistence of South African unit trust funds
Smith, Francois (University of Pretoria, 2021-10)
The optimality of active or passively managed investment fund alternatives is a contentious topic in the field of investment management. The efficient market hypothesis states that active funds should not be able to derive net-of-fee risk-adjusted returns in excess of their benchmarks on a persistent basis. However, emerging market economies such as South Africa that have less efficient markets, present active managers with greater opportunities to persistently outperform after fees have been accounted for. This study evaluates the performance persistency of actively managed South African equity, interest-bearing, multi asset, and real estate unit trust funds relative to investable passive alternatives. The rolling holding period performance of actively managed unit trusts relative to investable passive alternatives are assessed by making use of notched boxplots. Active funds are classified as persistent out- or underperformers if the median of their rolling period excess return distributions relative to their respective passive alternatives is significantly different from zero at a 5% level of significance. This study finds that a greater proportion (83.969%) of active funds persistently out- or underperform their comparable passive alternatives. More evidence of persistently outperforming funds is found amongst interest-bearing and real estate funds. Conversely, a greater number of persistently underperforming funds are found amongst equity and multi asset funds. Furthermore, this study concludes that other determinants of unit trust fund performance persistence such as the degree of competition, sector- and fund-level diseconomies of scale, and investment charges should supplement the analysis of a fund’s performance history when making future investment decisions.
Board characteristics, ownership concentration and value-added efficiency : a multi-theoretic contingency framework
Seligmann, Joanne (University of Pretoria, 2021)
The importance of intellectual capital and the management of this resource is increasingly important to value creation owing to the shift from a product-based economy to a knowledge-based economy. The board of directors plays an important role in the management of intellectual capital and performs multiple roles simultaneously. These roles include the monitoring and control role, the stewardship role, the service role and the strategic role. The characteristics of the board of directors influence the performance of these roles and the effectiveness of the management of intellectual capital. Enhanced intellectual capital management has the potential to improve intellectual capital performance and create value for a company. A multi-theoretic contingency model was adopted to acknowledge the multiple roles of the board of directors by applying an integrated approach to agency theory, stewardship theory, resource dependence theory and stakeholder theory. The multi-theoretic contingency model used ownership concentration as the contingent factor, to examine the relationships between the characteristics of the board of directors and intellectual capital performance, measured as the efficiency of value added by a company from its resources. A deeper understanding was obtained by considering the moderating effect of ownership concentration on these relationships. Ownership concentration may be viewed as a corporate governance mechanism that either reduces or aggravates the agency problem, impacting the resources available for the effective management of intellectual capital by the board of directors. The estimated generalised least squares method was applied to the regression models, with period seemingly unrelated regressions weightings and using White (diagonal) standard errors and covariance estimation methods. This mitigated the problems associated with autocorrelation and heteroscedasticity. The estimation method was first applied, without any interaction terms, to examine the relationships of ownership concentration and the characteristics of the board of directors with the efficiency of value added by a company from its resources. Interaction terms, which were created by using ownership concentration as the potential moderating variable, were then individually introduced to the regression models. This was done for the full sample and also for the top industries on the Johannesburg Stock Exchange. The findings of this study are important for the advancement of corporate governance policies that focus not only on the monitoring and control role, but also the service and strategic roles, of the board of directors. The study indicated that a higher level of ownership concentration had a moderating effect on the relationships between the characteristics of the board of directors and the efficiency of value added by a company from its resources in certain circumstances. However, the findings also indicated that the specific measure of ownership concentration was significant. In addition, the results differed between industries, suggesting that corporate governance policies should not be generic.
The relationship between retirement planning and financial advice in South Africa
Hlabati, Kedibone (University of Pretoria, 2020)
Purpose: Retirement planning has been declining rapidly all over the world due to the shift of self-funding mechanisms, such as moving from a Defined Benefit (DB) plan to the Defined Contribution (DC) plan, where individuals are required to manage their own financial wealth. Due to this rapid shift, there has been an increase in demand for financial advisors to assist individuals with decision-making and explain complex financial concepts with the perception of guiding households to build their retirement wealth. The aim of the study is to examine the relationship between retirement planning and financial advice as a predictor for retirement adequacy to determine if the latter will have any influence in helping South Africans be financially independent when they retire. This study was compelled by the fact that no or limited prior studies have been conducted in the South African context on the relationship between financial advice and retirement planning. Design/methodology/approach: In order to investigate the relationship and influence of financial advice on retirement planning, a South African Social Attitudes Survey that was conducted in 2011 by the Human Sciences Research Council was used. The chi-square and the logistic regression statistical techniques were applied to test the study hypotheses using the data from the survey. The following hypotheses were included: H0: There is no relationship between retirement planning and financial advice. H1: There is a relationship between retirement planning and financial advice. H0: There is no relationship between socio-demographics and retirement planning. H2: There is a relationship between socio-demographics and retirement planning. H0: There is no relationship between socio-demographics and financial advice. H3: There is a relationship between socio-demographics and financial advice. Findings: The results indicate that there is a positive relationship between retirement planning and financial advice. The more individuals seek financial advice the more they tend to adequately plan for retirement. Practical implications: In view of the strong relationship between the two variables, employers, government and institutions should prioritize making financial advice an essential part of retirement planning for employees.
The value relevance of goodwill and its disclosure for companies listed on the JSE
Louw, Elmarie (University of Pretoria, 2020)
The value relevance of goodwill is a topic of ongoing discussion in accounting, because of the nature of this intangible asset, and changes in the accounting standards regarding the disclosure of goodwill and goodwill impairment. International Financial Reporting Standard (IFRS) 3 was implemented in March 2004 with the aim of improving the reliability of goodwill accounting, introducing a major change, namely the requirement to test annually for goodwill impairment. The aim of this study was to determine the value relevance of goodwill after the introduction of IFRS 3 in a specific setting, namely South Africa, using JSE-listed firms as a sample. It also investigated the determinants for both goodwill impairment decisions and the disclosure quality of goodwill impairments, as well as the value relevance of goodwill impairment and its disclosure. Finally, the study considered the explanation strategies used by management to provide reasons for goodwill impairment. Panel least squares regressions and a cluster analysis were used to analyse JSE-listed firms for the period from 2006 to 2017. The findings show that goodwill is indeed value relevant. Significant predictors of goodwill impairment were found to be potential earnings management, whether a firm was goodwill intensive, and corporate governance mechanisms. Goodwill impairment in itself was not value relevant, but it was a predictor of market value when its disclosure was taken into account. Findings indicated that goodwill impairment test-related disclosure was negatively associated with a firm’s market value. Firms that provided an excuse for impairing goodwill, without taking responsibility for that impairment, tended to have higher quality of disclosure than firms that did not provide any reason for goodwill impairment at all. The study contributes to the existing literature by presenting evidence that goodwill is value relevant in the South African setting after the introduction of IFRS 3, and that when investors determine a firm’s market value, investors simultaneously assess goodwill impairment and its disclosure. How reasons for impairment are provided by management also provides insight into the quality of goodwill impairment disclosure.
The role and usage of suitable financial products for saving and investment purposes in South Africa
Sekgala, Eunice Raamabele (University of Pretoria, 2020)
The study focused on examining the saving and investment behaviours of South Africans. There has been no extensive research in existing literature that has focused on this area of study. This study intends to extend the understanding of what factors contribute to the decisions individuals make about saving and investment. The primary research objective was to explore and empirically test the statistical significance of income, education and gender related to the use of suitable financial products and investigate optimal ways to save and invest. This was a quantitative study which used secondary data obtained from the Human Science Research Council database gathered through a structured questionnaire. A sample of 2,972 individuals across the country participated in and completed the survey. The results illustrated that low-income participants saved less through informal saving schemes than high-income participants, but the statistical significant difference between these groups is too small. The findings also showed that less-educated participants used predominantly more formal saving products than highly educated participants and the statistical significant difference between these groups is large. Finally, the findings highlighted that females make better investment choices than males, but the statistical significant difference between these groups is too small. This study illustrated that low savings and investment in South Africa is influenced by the type of financial products used and also demographic factors such as income, education and gender.
The value relevance of derivatives for South African listed companies
Toerien, Franz Eduard (University of Pretoria, 2020)
This study investigates the use of derivatives by firms listed on the Johannesburg Stock Exchange (JSE) during 2005 to 2017, and the disclosure of derivative financial instruments on the financial statements of these entities. The study can be broadly divided into two parts: the first part investigates the determinants of corporate hedging practices by JSE-listed firms, while the second part analyses the value relevance of derivatives disclosures. The first part of the study thus answers the question ‘Why do companies use derivatives?’ with reference to JSE-listed companies for the period 2005 to 2017. The second part of the study answers the question ‘Does the disclosure of derivatives in the financial statements have an impact on firm value?’ for the same companies and period. Binomial logistic regression analyses were done to assess the determinants of the corporate hedging practices employed by JSE-listed firms. Multiple linear regression analyses were used to determine the value relevance of derivatives disclosures. The results of the study suggest that firm size, growth prospects, leverage and managerial risk aversion are important determinants of JSE-listed firms’ hedging decisions. Furthermore, the findings suggest that the disclosure of firms’ use of derivatives in the financial statements is value relevant and that companies listed on the JSE are associated with a higher Tobin’s Q if they disclose a derivatives amount. This study also investigates whether the value relevance of derivatives disclosure is influenced differently under different conditions during different economic periods and whether the level of quality of the disclosure influences the value relevance of derivatives disclosure. The data show that the value relevance of risk disclosure companies depend on different economic periods, and that the level of higher quality risk disclosure has a negative impact on the value relevance of derivatives disclosures: firms are valued lower where the level of quality of derivatives disclosures is higher.
Board characteristics and the financial performance and risk management of companies listed on the Johannesburg Stock Exchange
Kok, Gerrit S. (University of Pretoria, 2020-09-16)
The thesis investigated the relationship between multiple board characteristics and five performance and risk-management indicators. Following criticism against testing for linear relationships when it comes to corporate relationships, the study used binary logistic regression to determine whether relationships exist between the board characteristics and the likelihood that companies will rank as top performers in terms of the respective measures. The research confirmed that a number of characteristics have statistically significant relationships with the financial performance and risk-management measures. These findings are useful for determining which board characteristics a company should focus on, given the specific objectives a company wishes to pursue. However, findings in terms of board characteristics that did not show statistically significant relationships to financial performance and risk management measures are equally useful, as this indicates that those characteristics can be included in a board, if there is a different motivation for doing so, without jeopardising the wellbeing of the company.
Inter-relationship between the capital structure and distribution policies of companies listed on the JSE
Mvita, Mpinda Freddy (University of Pretoria, 2020)
Previous studies have invoked information costs, the trade-off theory and the pecking-order theory as well as agency problems to explain capital structure and distribution strategies independently. However, the theories of the signalling, pecking-order, trade-off and agency cost suggest that a company’s capital structure and distribution strategies are interrelated not only through joint determinants, namely the company-specific attributes, but also directly to each other. Consequently, this research examined the inter-relationship between capital structure and distribution strategies (dividend payments and repurchase of shares) of companies listed on the Johannesburg Stock Exchange (JSE) in the four main sectors for the periods 1990 to 2017 and 1999 to 2017. The study was done for two periods because the repurchase of shares in South Africa only became legal during 1999. Using the pooled regression model, the fixed-effects model, the random effects model, the generalised method of moments and the three-stage least squares estimation (full information), the results revealed that the financing patterns and the distribution strategies of JSE-listed companies were likely to be jointly determined. The results also indicated that the interdependence between capital structure and distribution policies could also be determined through some joint determinants. Advanced threshold regression analysis was used. The empirical evidence supported the existence of an optimal capital structure and the threshold effect, for the payment of dividends over the period 1990 to 2017 and 1999 to 2017, which was consistent with the trade-off theory. However, the threshold effect did not affect share repurchases over the period 1999 to 2017. Furthermore, the results of the model of choice revealed that the choice between the dividend payments, both (dividend payments and the repurchase of shares) or none (neither dividend payments nor share repurchases) relative to share repurchases was driven by profitability, company size, cash flow, working capital and market volatility. The results indicated that with an increase in profitability as a determinant of choice, JSE-listed companies were more likely to choose to pay dividends only or pay dividends and repurchase shares at the same time. During periods of high market volatility (policy uncertainty in the market), the results showed that South African managers chose to reduce the amount paid in dividends and share repurchases or neither pay dividends and repurchase shares at all. The sectoral analysis revealed that the four chosen sectors of the JSE were subjected to different challenges in terms of operating risk, technology requirement and environmental regulations, which resulted in different financing decisions and distribution strategies. The literature indicated that companies’ financing and distribution decisions not only relied on companies’ specific characteristics, but the nature of the sectors could also determine these decisions. This argument was consistent with the research findings. The findings in the study have important implications for putting into practice good financing and distribution policies. The outcome of the analyses implies that South African companies in the four main sectors, namely basic materials, industrial, consumer goods and consumer services, and their managements teams must be aware of the inherent interactions among financing and distribution decisions in order to avoid undesirable side effects which may result from a wrong decision. Consequently, South African managers should consider the key corporate decisions simultaneously and through joint determinants.
The relationship between retirement planning and financial literacy in South Africa
Dhlembeu, Nyasha Tapiwa (University of Pretoria, 2018-10-31)
There is a global shift with regard to the retirement provision of individuals as people have a greater responsibility towards their financial plans for retirement. Globally, there is a concern that people are not saving enough for retirement and in South Africa, only 6% of the population is expected to retire with adequate funds to maintain their standard of living. The objective of this study is to determine if there is a relationship between retirement planning and financial literacy in South Africa and thus establish the correlation between financial literacy and low retirement savings rates. Furthermore, the financial literacy level and retirement planning behaviour of specific sociodemographic groups is discussed with a focus on age, gender, race, education level and income level. Secondary data collected from the South African Social Attitudes Survey (SASAS) 2011: Financial Literacy Baseline Survey has been used for this study and the survey was conducted on a sample of 2 972 individuals. To increase the validity of the results, the chi-square test, independent sample t-test and binomial logistic regression analysis are used to test the relationship between the two variables. All tests reveal a significant positive relationship between retirement planning and financial literacy. The study further reveals that only 27% of South Africans are actively planning for retirement and the sociodemographic groups with low retirement planning behaviour include women, less educated individuals, black African people and low-income earners. This study contributes to retirement planning literature by establishing the relationship between financial literacy and retirement planning in the context of a developing country that belongs to the association of five major emerging economies: Brazil, Russia, India, China and South Africa (BRICS). It is recommended that future research determines other factors that affect retirement planning and the effect of financial literacy on other financial behaviours, such as saving for emergencies.
Distribution policy and creation of shareholders' wealth : a study of firms listed on the Johannesburg Stock Exchange
Munzhelele, Ntungufhadzeni Freddy (University of Pretoria, 2019)
Dividend payout decisions remain one of the key functional areas in corporate finance, as it involves the means by which shareholders receive returns on their investments. For many decades, the academic debate on payout decisions has been ongoing as researchers attempted to analyse and explain how these decisions impact on the creation and maximisation of value for shareholders; the fundamental reasons why companies exist. Researchers have not found conclusive answers to put the debate to rest; rather attempts to put together pieces of the dividend dynamics have raised more questions and hence the dividend puzzle. The recognition of share repurchases as payout option (and hence distribution decisions) have made the debate quite complex. The current study, thus sought to contribute to distribution decisions’ debate in a number of ways. The study firstly reviewed the extended dividend payout models of Fama and Babiak (1968), and Andres, Betzer, Goergen and Renneboog (2009) thereby adding further explanatory variables and then tested the extended model in the South African setting. The data of 110 sample companies (Panel 1) which were also disaggregated into 85 value companies (Panel 2) and 25 growth companies (Panel 3) was used. The hypotheses were tested using the ordinary least squares (OLS), difference general method of moments (Diff GMM), system generalized method of moments (Sys GMM) and least square dummy variable correction (LSDVC) estimators. The study confirmed results of similar previous researches and also identified further trends relating to South African corporate setting. It was found that companies have target payout ratios which they adjust towards, also managers are reluctant to change (increase) dividends which may have to be cut again later and in their endeavours to create and maximise value, may have to sacrifice paying dividends. These trends are evident more with growth companies. The study secondly, tested the dividend life cycle hypothesis. A sample of 119 companies (Panel 4) were used in this regard, as well as a disaggregated sample of 86 value companies (Panel 5) and 33 growth companies (Panel 6). The hypotheses were tested using the same estimation procedures as mentioned above. The results showed that the dividend life cycle hypothesis is prevalent among South African companies. Specifically, it was observed that the considered companies pursuing growth projects paid less dividends. Furthermore, the growth companies have shown to be more aggressive in their pursuance for growth and hence are able to create more value for shareholders than value companies. Lastly, the study examined the extent to which share repurchases are used as payout option (i.e., payout flexibility), as well as factors that determine the payout flexibility. The sample number of 52 companies (Panel 7) were used in this regard and hypotheses were tested using the OLS, Diff GMM and Sys GMM. The results indicated that there is inherent flexibility of share repurchases over cash dividends; the size of company has negative and significant correlation with payout flexibility. This implies that larger companies pay out a lower fraction of payout as repurchases, and thus evidence of attitude of managers of these companies relatively different from that of smaller ones; and that share repurchases serve both substitute and complementary roles to cash dividends. This evidence collectively makes unique contribution to existing body of knowledge, particularly, for emerging economic settings, and managers will be provided with enhanced decision alternatives in their endeavours to maximise value.
The Saving Behaviour of University Students in South Africa
Kekana, Mamekwa Katlego (University of Pretoria, 2014-10-31)
This study was necessitated by the fact that, thus far, no prior research on the saving behaviour of young adults, particularly university students, had been undertaken in a South African context. The primary objective of this study was to investigate and identify the saving behaviour of university students in South Africa. To meet this objective, the study investigated the following aspects: • The importance of saving for households and the economy, and the role that saving motives play in encouraging positive saving behaviour. • The economic, psychological and behavioural theories that attempt to explain the saving behaviour of individuals. • The importance of placing young adult saving behaviour into context in order to identify gaps in people’s knowledge of the development of saving behaviour in young adults. The study was conducted using a quantitative approach by means of a survey. A structured questionnaire was developed to assess and collect data on participants’ demographic information as well as their saving behaviour. A total of 248 students from University of Pretoria, Pretoria, South Africa completed the questionnaire. The data was analysed using parametric statistical techniques. The study led to the following important findings: • University students in South Africa do engage in positive saving behaviour. • Male university students engage in better saving behaviour than female university students. • With regard to ethnicity, non-white university students engaged in better saving behaviour as compared to their white counterparts. • Having a part-time job while studying resulted in better saving behaviour compared to non-working full-time students. This study’s conclusions indicate that the saving decisions made by university students in South Africa are influenced by behavioural factors. The study has provided a solid foundation for further research into this field in an emerging economy such as South Africa.
Behavioural aspects that influence business decision-making by management accounting professionals
Enslin, Zacharias (University of Pretoria, 2019)
In their traditional role as ‘bean-counters’, ‘scorekeepers’ and ‘controllers’, management accountants were frequently excluded from operational decision-making. Criticism by operational managers about management accountants’ decisions-making behaviour included that management accountants preferred evidence-based decisions, as opposed to the intuitive decisions that were regularly required in the business management environment. However, the role of management accounting professionals are changing to that of business partner. The first aspect which the study investigated was whether management accounting professionals experienced an increase in their involvement in business-related decision-making, as suggested by their emerging business partner role. Psychology-related behavioural aspects, which may result in biased decision-making, play a definite role in decision-making behaviour where the use of intuition is required. A review of literature indicated that management accounting professionals were less comfortable with making intuitive decisions. Therefore, they could be particularly susceptible to decision biases related to the influence of behavioural aspects. Accordingly, the second aspect which the study investigated was the susceptibility of management accountants to the main behavioural decision biases related to the use of decision heuristics and the effects of frame dependence. A survey design was employed to investigate decision-making involvement and susceptibility to behavioural biases by means of an electronic questionnaire. Responses were received from an international sample of management accounting professionals, including members of the Institute of Management Accountants (USA) and the Chartered Institute of Management Accountants (UK). The responses were analysed quantitatively, using both univariate and multivariate statistics. The study extends the current body of knowledge by being the first to comprehensively investigate the presence of behavioural biases in the decision-making behaviour of management accounting professionals as a group of decision-makers, which is especially relevant due to their changing decision-making role in organisations. Additionally, contrary to many previous studies in the behavioural decision-making field, the study focused on an international, widely dispersed, sample of professionally employed decision-makers. The study also contributes to the debate on the conflict in findings regarding the prevalence of the changing role of the management accountant. The important findings of the study were as follows: · Management accounting professionals were involved in making business-related decisions. However, this involvement varied depending on the position in which a management accounting professional was employed, and the size of the company in which the professional was employed. The findings regarding the decision-making involvement of management accounting professionals also indicated that the promulgated business partner role was not as pervasive as suggested by most of the literature. · Management accounting professionals experienced an increase in business decision-making involvement. This experience was not as widespread as the literature on the business partner role suggests, and was more pronounced for professionals between 30 and 49 years of age, and those more amenable to using their judgement when making decisions. · Management accounting professionals were susceptible to frame dependence bias. The susceptibility of management accounting professionals to the biases of concurrent decisions framing, the certainty effect and the pseudo-certainty effect was similar to that of other populations. However, these professionals exhibited a lower susceptibility to loss aversion bias. Their susceptibility to mental accounting bias requires further investigation. · Management accounting professionals were also susceptible to heuristic-based bias. Their susceptibility was similar to that of other populations for the representativeness-related confirmation bias, as well as for the adjustment and anchoring heuristic-related bias. Management accounting professionals exhibited lower susceptibility than other populations to the biases of misconceptions of chance, misconceptions of regression to the mean, general overconfidence, and affect. However, they were more susceptible to overconfidence in performing difficult tasks than other populations. The findings could be of value to the management accounting profession in indicating that educational requirements existed for both the traditional and emerging roles of the management accountant. The study also initiated the research into the susceptibility of management accounting professionals to behavioural biases and paved the way for research and other actions aimed to debias the decision-making behaviour of these professionals.

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