Share buybacks in South Africa : an empircal investigation

Kokokoane, Nimrod (2007-12)

Thesis (MBA)--Stellenbosch University, 2007.

Thesis

ENGLISH ABSTRACT: Share repurchase activity (or buybacks), as a corporate finance decision-making tool, has increased steadily over the years, both in the USA and in other markets around the world. This research report investigates share repurchase (of ordinary shares) activity in South Africa between July 1999 (when buybacks were legalised) and December 2006. Consistent with empirical evidence elsewhere in the world, the results show that South African companies have increased their share repurchase activity in absolute terms (volume and value). Corporate South Africa is estimated to be sitting on a huge cash pile of approximately R600 billion (or 38% of GOP) - a significant prerequisite for share repurchases. In the absence of potential projects and acquisitions that meet the firms' weighted average cost of capital, it is reasonable to expect that the level and value of buyback activity will increase in the foreseeable future.

AFRIKAANSE OPSOMMING: Die aandeleterugkoop-bedrywigheid (of aandeleterugkope), as 'n korporatiewe finansiele besluitnemingshulpmiddel, het geleidelik toegeneem oor die jare, beide in die VSA en in ander markte wereldwyd. Hierdie navorsingsverslag ondersoek die aandeleterugkoop-bedrywigheid in Suid-Afrika tussen Julie 1999 (toe terugkope wetlig geword het) en Desember 2006. In Iyn met empiriese bewyse elders in die wereld, toon die resultate dal Suid-Afrikaanse maatskappye hul aandeelterugkoop-bedrywighede in absolute terme (volume en waarde) verhoog het. Oit word beraam dat korporatiewe Suid-Afrika 'n groat kontantreserwe van bykans R600 biljoen (of 38% BBP) het - 'n noemenswaardige voorvereiste vir aandeleterugkoop. In die afwesigheid van potensiele projekte en aankope wat die firmas se geweegde gemiddelde koste van kapitaal behaal, is dit aanvaarbaar om te verwag dat die vlak en waarde van terugkoopbedrywigheid in die afsienbare toekoms sal verhoog.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/20834
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