Masters Degrees (Business Management)
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Browsing Masters Degrees (Business Management) by browse.metadata.advisor "Erasmus, P. D."
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- ItemDividend policy and wealth maximisation : the effect of market movements on dividend-investing returns(Stellenbosch : Stellenbosch University, 2013-03) Du Toit, Nicol Eduan; Erasmus, P. D.; Stellenbosch University. Faculty of Economic and Management Sciences. Dept. of Business Management.ENGLISH ABSTRACT: This study sets out to evaluate the possible influence of increasing and declining markets on the returns of dividend-investing strategies. This study’s objective, therefore, was to evaluate the possible influence dividend pay-out policy has on share return. Secondary objectives serve to investigate how the size of cash dividend payments, measured in dividend yield (DY), influence share value, especially during bull and bear markets respectively. In order to address the stated objectives of this study and prevent possible survivorship bias, the sample included listed and delisted shares for the period 1995 to 2010. Initially, all firms that were listed on the Johannesburg Stock Exchange (JSE) during the period under review were considered, both that were listed at the end as well as firms that delisted. However, due to the nature of the financial structures of firms in the financial and basic industries, the study did not include their data. The final sample consisted of 291 firms, providing 22 927 monthly observations. Dividend-investing strategies were constructed using non-dividendpaying (Portfolio one) and dividend-paying firms (Portfolio two). Portfolio one and two were then further deconstructed into four groups based on monthly DY rankings. Portfolio one was represented by Group 1, whilst Portfolio two was grouped into the lowest, medium, and highest DYs and classified as Group 2 to Group 4 accordingly. The results obtained from statistical analyses performed in this study indicate that the level of DY appears to influence returns positively. Furthermore, after investigating the results obtained during opposing market scenarios, some important findings resulted. During bear markets no significant difference in abnormal risk-adjusted returns was observed for the portfolios and four groups, however, in bull markets the return for Portfolio two, specifically Group 4, was more than double the result for the non-dividend payers. This study, therefore proposes that firms should have a DY in the range of the highest market DY average for bull markets specifically. From the perspective of the potential investors, the study suggests that dividend-investing could allow for the generation of positive risk-adjusted returns during bull markets.
- ItemThe effect of firm characteristics and economic factors on the capital structure of South African listed industrial firms(Stellenbosch : University of Stellenbosch, 2010-12) De Vries, Annalien; Erasmus, P. D.; University of Stellenbosch. Faculty of Economic and Management Sciences. Dept. of Business Management.ENGLISH ABSTRACT: The objective of almost all firms should be to maximise the wealth of shareholders. To achieve this goal, firms should use an optimal combination of debt and equity, which will consequently result in the lowest weighted average cost of capital. Firms therefore need to determine their target capital structure. This will require firms to be aware of the various factors that can influence their decision-making regarding capital structure. The effects of firm characteristics and economic factors on capital structures have been researched in many countries. Various South African studies have been conducted on this topic; however, limited research was found where both the firm characteristics and economic factors were included in the same study. The majority of South African studies furthermore either focused on a specific industry on the Johannesburg Securities Exchange Limited (JSE) or their focus was predominantly on the theory of capital structure applied by South African firms. Most of the studies were also conducted for the period prior to the demise of apartheid in 1994. Six firm characteristics (profitability, asset structure, liquidity, business risk, growth and size) and three economic factors (interest rate, inflation and economic growth) were identified for this study. The primary objective was to determine the effect of firm characteristics and economic factors on the capital structure of South African listed industrial firms. External databases were used to obtain the data needed for statistical analysis. McGregor BFA (2008) was used to obtain the data required to calculate the measures for the firm characteristics. This database contains annual standardised financial statements for listed and delisted South African firms. INET-Bridge (2005), Statistica South Africa (2006) and the South African Reserve Bank (SARB) website were used to obtain data for the economic factors. The study was conducted for a period of 14 years, from 1995 to 2008. Focusing only on those firms that are listed at the end of the selected period would have exposed the study to a survivorship bias. The census for this study, therefore, included all firms listed on the industrial sector of the JSE, as well as those firms that delisted during the selected period. Firms had to provide financial data for at least five years in order to be included in this study. This requirement was incorporated since the data set contains cross-sectional and time-series dimensions. The final census included a total of 280 firms (170 listed firms and 110 delisted firms), providing 2 684 complete observations for the firm characteristics and 14 complete observations for the economic factors. The results from this study indicated that the growth of firms and the interest rate may be the most important firm characteristic and economic factor, respectively, to consider in financing decisions. The study furthermore indicated that differences exist between the results obtained for book value leverage and those obtained for market value leverage. An important observation is that the results are stronger when the performance of the variables in the preceding year is included. Not only are the R² values higher, but the independent variables also reported to be more significant when one-year lag variables are included. This may indicate that capital structure takes time to adjust. Differences between listed firms and delisted firms are also evident from the results. Lastly, it appears that the firms included in the study overall, lean more towards the pecking order theory than towards the trade-off theory. Based on these results, it appears that firm characteristics and economic factors do have an effect on capital structures of listed industrial firms in South Africa. Firms should, therefore, take these factors into consideration when making their optimal capital structure decisions.
- ItemThe effect of the changing economical environment on the capital structure of South African listed industrial firms(Stellenbosch : University of Stellenbosch, 2010-03) Mans, Nadia; Erasmus, P. D.; University of Stellenbosch. Faculty of Economic and Management Sciences. Dept. of Business Management.ENGLISH ABSTRACT: The determinants of capital structure form an important part of the finance profession. Contemporary capital structure theory began in 1958 when Modigliani and Miller indicated that in a perfect capital market, the value of a firm is not influenced by its capital structure. However, when considering, inter alia, the effect of taxes, bankruptcy costs and asymmetric information, the value of a firm could be affected by its leverage. Capital structure theory offers two contrasting capital structure models, namely the trade-off and pecking order models. According to the trade-off model, firms trade-off the costs and benefits of debt financing in order to reach an optimal capital structure. According to this model, a positive relationship exists between leverage and profitability. In contrast, the pecking order model indicates that firms use a financing hierarchy where internal funds are preferred above debt and equity usage. This model indicates a negative relationship between leverage and profitability. However, in practice, firms often deviate from these models to incorporate the benefits of the other model or to adapt to changing circumstances. Firms' financing decisions may be influenced by both firm-specific and economical factors within the country where they are operating. Therefore, a firm's managers should consider the growth rate, interest rate, repo rate, inflation rate, exchange rates and the tax rate when conducting finance decisions, since these factors could influence the cost and availability of capital. In addition, these economical factors often have a significant influence on each other. Prior capital structure research mainly focused on developed countries. However, South Africa provides the ideal environment to consider the effect of economic changes on capital structure within a developing country, due to South Africa's profound economic changes during 1994 and the years to follow. The primary objective of this study was thus to determine whether the capital structures of South African listed industrial firms are influenced by changes in the South African economical environment. The effect of economic changes on capital structure was examined by using a TSCSREG (time-series cross-section regression) procedure. The regression model is based on a model developed by Fan, Titman and Twite (2008). One-period lags were built into the model to make provision for the effect of economic changes that often only occur after some time. The study was conducted on a sample of firms listed on the industrial sector of the Johannesburg Securities Exchange (JSE Ltd) over the period 1989 to 2008. The data, required to calculate the measures, were obtained from the South African Reserve Bank, the South African Revenue Service and the McGregor BFA database. This database contains standardised financial statements for both listed and delisted South African firms. In an attempt to reduce the possible skewing of results due to survivorship bias, both listed and delisted firms were included in the sample. In order to reflect its true nature, data should be available for consecutive years. Therefore, only firms with data available for more than five years were included in the final sample. The resulting sample consisted of 320 firms and 4 172 observations. The sample was also divided into years before and years after 1994, in order to determine the effect of the economic changes during 1994 and the years to follow on the firms' capital structures. The results of this study indicated that some of the economic factors influenced the D/E ratio as well as each other. However, the effect of economic changes often only occurred after a lagged period. A strong relationship was indicated between the tax rate and the repo rate, which influenced the significance of the regression results. Support was found for both the trade-off and the pecking order models. The combined profitability variable ROA-ROE also had a significant effect on the other variables. Based on these results, the claim that economic changes have an impact on capital structure is supported. The effect is often only indicated after a certain period. It also seems that the combination of the two capital structure models have a significant effect on leverage. Firms therefore appear to consider a combination of these models when conducting finance decisions.
- ItemInvestor short-termism on the Johannesburg Stock Exchange(Stellenbosch : Stellenbosch University, 2023-12) Moll, Lucy; Erasmus, P. D.; Stellenbosch University. Faculty of Economic and Management Sciences. Dept of Business Management.ENGLISH SUMMARY: Participants in global financial markets appear to be placing increased pressure on corporate managers to prioritise short-term results. When managers are pressurised into focusing on shortterm financial performance, the actions required to ensure the long-term sustainability of a company might be deferred or overlooked. Barton (2011) argued that the capital markets are experiencing an era of quarterly capitalism, where the nearly continuous release of new information has contributed to a shift in market participants’ focus from the long-term sustainability of a company to its short-term share performance. Traditional finance theory assumes that markets operate efficiently, and that market participants have access to perfect information which allows them to make decisions in a rational manner. Under traditional assumptions, market prices accurately reflect a share's intrinsic value. However, volatile market conditions and numerous market anomalies may suggest the opposite. Behavioural finance theory attempts to explain this by examining behavioural biases such as short-termism, often displayed by investors when making intertemporal investment decisions. When accentuated by herding, myopic preferences could have a significant impact on asset valuation models. Short-termism occurs when investors overvalue short-term returns by applying higher discount rates to more distant cash flows. This disproportionate discounting might result in market prices deviating from their intrinsic values. This problem might be further compounded when corporate managers also prioritise short-term cash flows, possibly resulting in underinvestment in future, long-term fundamental value-generating projects. The results of previous studies (Haldane and Davies, 2011; Miles, 1993; Chou and Guo, 2004) have indicated that investors in the United Kingdom (UK) and the United States (US) exhibited shorttermism. The authors found that the discount rates applied to shares were adjusted to overvalue near-term cash flows and undervalue long-term returns. Whereas these studies have investigated the presence of short-termism in developed countries, only limited research has been conducted on the phenomenon in developing countries. The primary objective of this study was to investigate investor short-termism in South Africa from 1995 to 2014. The sample of the study included companies that had been listed on the Johannesburg Stock Exchange (JSE) from 1995 to 2014. The regression model employed included five years of lagged and future variables for each company considered. Therefore, the data were collected within the timeframe from 1990 to 2019. In order to provide five years of lagged and future values, companies were required to publish the necessary data continually for 11 years. The resulting sample consisted of 280 companies and 3 577 company-year observations. To assess for changes over time, the sample was divided into two ten-year subperiods over the study period. The sample was also divided between sectors to investigate short-termism in companies operating in different industries. Multiple regression analyses were used to test for short-termism in the sample. The regression model employed was based on a theoretical model developed by Davies, Haldane, Nielsen and Pezzini (2014). The regression model was estimated using the Generalised Method of Moments (GMM) estimation method. The Wu-Hausman endogeneity test, Sargan’s test for overidentifying restrictions and the Cragg-Donald weak instrument test were used as diagnostic tests to determine the suitability of the GMM estimation method for the current study. The results of the study indicated that investors in JSE-listed companies exhibited significant levels of short-termism over the study period, the degree of which was found to have increased over time, with statistically significant evidence of sustained short-termism found in the final decade of the study period. When considered at a sector level, investors in the basic materials sector were found to have exhibited the highest levels of short-termism among the four applicable sectors in the study. To reduce short-termism in South Africa, the researcher recommends that managers adopt a corporate culture that promotes long-termism, discourage quarterly reporting, structure executive remuneration to facilitate long-term financial performance and offer enhanced shareholder participation rights to long-term investors. Furthermore, investors are encouraged to exercise stewardship and provide executives with investor mandates that prioritise sustainable investing. The government is also encouraged to adjust capital gains tax to reward long-term share ownership, promote short-termism awareness through improved financial literacy programmes in curriculums and enhance or modify fiduciary duties of financial intermediaries to align the long-term interests of stakeholders.
- ItemMeasuring marketing productivity : linking marketing expenditure to sales(Stellenbosch : Stellenbosch University, 2012-03) Schmidt, Adelia; Gerber, C.; Erasmus, P. D.; Stellenbosch University. Faculty of Economic and Management Sciences. Dept. of Business Management.ENGLISH ABSTRACT: Over the past two decades company performance has become the mantra of corporate theory. It follows that marketers have recently become understandably preoccupied with measuring the performance of marketing activity. In fact, the pressure for financial accountability has led to widespread concern over the role of the marketing function within a company. Some go as far as contemplating the demise of marketing professionals unless marketers develop an understanding of the marketing-finance interface and are able to enter into a dialogue with top management regarding the value that marketing adds to the company. Modern financial theory prescribes that the primary financial objective of any company should be shareholder value maximisation. Value based management (VBM) involves the appropriate allocation of scarce resources using prioritisation and cost-benefit analyses of different strategies to ensure that managers remain focused on shareholder value creation. The VBM philosophy embraces four fundamental driving forces impacting on the creation of value, the first of which is the profitable growth of sales. Since marketers are the custodians of brand sales the recognition of sales as a value driver places marketing at the centre of the value culture. The role of the marketing function is to create customer value that will translate into marketing assets (brand equity) and by doing so serves to add value to a company. The brand value chain summarises the process through which marketers can create value by carefully investing in various marketing tactics (or expenditures). These expenditures are encapsulated by the marketing mix. Simply, the marketing mix can be described as the sum of all expenditures intended to build brand equity and can be classified into four components known as the 4Ps (product, price, place and promotion). Concern has been raised that marketers focus too much attention on the stages in the brand value chain where marketing strategy is formulated and too little attention on the latter stages where the strategy is linked back to the value created through the implementation thereof. Despite the plethora of marketing metrics available the key to measuring the impact of marketing activity lies in maintaining a balance between non-financial, efficiency metrics and financial effectiveness metrics. To this end, there is a need for the development of aggregate-level models that link marketing tactics (expenditures) to to financial impact (e.g. sales) in order to communicate the value created by marketing. As a first step toward the objective of developing such models, it is important to understand the nature of the relationship between marketing expenditures (in terms of the 4Ps) and sales). Therefore, the primary objective in this study was to establish whether there is a relationship between the expenditures of different marketing components (4Ps) and sales. To this end, the proposition formulated elucidated that the variance in sales of a product is attributable to fluctuations in marketing expenditures. A meta analysis study was undertaken and two South African fast moving consumer goods brands’ financial data were investigated for the period of July 2001 to the end of June 2005. The marketing expenditures incurred for each of the respective brands were dissected and allocated according to the 4Ps of marketing. The metohod applied to investigate the relationship between marketing expenditures and sales originated through the adoption of multiple regression analysis between the indepent variables (marketing expenditures) and the dependent variable (sales). However, due to the fact that the data were collected over time it was anticipated that the time-related characteristics in the data might have offended inherent assumptions on which multiple regression analysis is based. Therefore, a time series regression analysis was subsequently adopted to account for time-related characteristics such as trend or seasonality. Counteracting dummy variables were included in the regression analysis to better understand the effect of trend and seasonality. In the case of Brand A, it was necessary to include dummy variables to counteract the effect of trend in the regression analysis., the results revealed that there is a statistically significant relationship between the expenditures of different marketing components (4Ps) and sales. Only distribution expenditures and price (along with trend) explained unique variance in sales. In the case of Brand B, it was necessary to include dummy variables for both trend and seasonality before the model was suitable for analysis. Once again, the results revealed a statistically significant relationship between the expenditures of different marketing components (4Ps) and sales. However for Brand B, only production expenditures (along with trend and seasonality) explained unique variance in sales. Therefore, in conclusion of the results found there were important findings to note. Firstly, when investigating data colllected over time it is imperative to understand the impact of time-related characteristics in the data and subsequently adopt the appropriate model to investigate relationships in the data. Secondly, despite a statistically significant relationship detected between marketing expenditures and sales the different components of the 4Ps have varying prominence for different brands and the appropriate allocation of resource will depend on the nature of the product and the strategy in mind.