Indicators of corporate financial success : similar studies in South Africa and the USA, different results

Abstract

PURPOSE: The aim of this study was to test whether findings by Johnson and Soenen (2003) regarding indicators of successful companies in the USA also apply to South African JSE-listed companies. PROBLEM INVESTIGATED: To date, no South African study has tried to determine the indicators of the financial success of local companies specifically along the lines of Johnson and Soenen’s (2003) study. Determining whether the indicators found to be most highly significant in the US study also apply in South Africa would constitute valuable information in the South African context. APPROACH: The study tested the significance of the linear relationships between possible indicators of financial success and three measures of financial success for South African companies and compared them to the results of the US study. FINDINGS: The findings revealed that the relationships are far less significant for South African companies. VALUE OF RESEARCH: The study highlighted the fact that indicators of financial success for US companies are not necessarily contributors to the success of South African listed companies and that models developed in different environments should therefore be used with caution when applied in South Africa. CONCLUSION: Further studies need to be undertaken in order to identify the most significant South African indicators of corporate financial success.