Debt leverage, company growth and job creation : South African manufacturing

Abstract

Unemployment and lack of economic growth have been an issue in South Africa. This research project studied the impact debt leverage has on a companyÕs ability to grow revenue and create jobs. Most recent literature focused on debt leverage and the increase in company investment but not extensively in company revenue growth. Furthermore, most literature was based on the developed economies. Also, the emphasis of most recent literature was on metrics that would benefit the investor more than it would benefit broad-based economic interests. A panel data regression was used to analyse crosssectional data primarily sourced from ÔMcGregor BFA Research DomainÕ. This analysis covered 74 publicly-listed South African companies which were from manufacturing, mining or construction sectors from 1992 to 2017. From this, it was found that debt leverage does not predict company growth or job creation. However, it was found that short-term debt leverage does predict company growth for companies whose total assetsÕ market value is less than total assetsÕ book value. Additionally, it was found that company size can, under most conditions, predict company growth and job creation.