Doctoral Degrees (School of Accountancy)

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    The development of optimal composite multiples models for the performance of equity valuations of listed South African companies : an empirical investigation
    (Stellenbosch : Stellenbosch University, 2014-10-09) Nel, Willem Soon; Bruwer, Barbara Wilhelmina; Le Roux, Niel J.; Stellenbosch University. Faculty of Economic and Management Sciences. School of Accounting.
    ENGLISH ABSTRACT: The practice of combining single-factor multiples (SFMs) into composite multiples models is underpinned by the theory that various SFMs carry incremental information, which, if encapsulated in a superior value estimate, largely eliminates biases and errors in individual estimates. Consequently, the chief objective of this study was to establish whether combining single value estimates into an aggregate estimate will provide a superior value estimate vis-á-vis single value estimates. It is envisaged that this dissertation will provide a South African perspective, as an emerging market, to composite multiples modelling and the multiples-based equity valuation theory on which it is based. To this end, the study included 16 SFMs, based on value drivers representing all of the major value driver categories, namely earnings, assets, dividends, revenue and cash flows. The validation of the research hypothesis hinged on the results obtained from the initial cross-sectional empirical investigation into the factors that complicate the traditional multiples valuation approach. The main findings from the initial analysis, which subsequently directed the construction of the composite multiples models, were the following: Firstly, the evidence suggested that, when constructing multiples, multiples whose peer groups are based on a combination of valuation fundamentals perform more accurate valuations than multiples whose peer groups are based on industry classifications. Secondly, the research results confirmed that equity-based multiples produce more accurate valuations than entity-based multiples. Thirdly, the research findings suggested that multiples models that are constructed on earnings-based value drivers, especially HE, offer higher degrees of valuation accuracy compared to multiples models that are constructed on dividend-, asset-, revenue- or cash flowbased value drivers. The results from the initial cross-sectional analysis were also subjected to an industry analysis, which both confirmed and contradicted the initial cross-sectional-based evidence. The industry-based research findings suggested that both the choice of optimal Peer Group Variable (PGV) and the choice of optimal value driver are industry-specific. As with the initial cross-sectional analysis, earnings-based value drivers dominated the top positions in all 28 sectors that were investigated, while HE was again confirmed as the most accurate individual driver. However, the superior valuation performance of multiples whose peer groups are based on a combination of valuation fundamentals, as deduced from the crosssectional analysis conducted earlier, did not hold when subjected to an industry analysis, suggesting that peer group selection methods are industry-specific. From this evidence, it was possible to construct optimal industry-specific SFMs models, which could then be compared to industry-specific composite models. The evidence suggested that composite-based modelling offered, on annual average, between 20.21% and 44.59% more accurate valuations than optimal SFMs modelling over the period 2001 to 2010. The research results suggest that equity-based composite modelling may offer substantial gains in precision over SFMs modelling. These gains are, however, industry-specific and a carte blanche application thereof is ill advised. Therefore, since investment practitioners’ reports typically include various multiples, it seems prudent to consider the inclusion of composite models as a more accurate alternative.
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    Gestruktureerde regsgefundeerde metodologie vir die inkomste-kapitaal riglyne en verwante subjektiwiteitsvraagstukke in die Suid-Afrikaanse inkomstebelastingreg
    (Stellenbosch : University of Stellenbosch, 2002-03) Swanepoel, Leon; Matthee, J.A.; University of Stellenbosch. Faculty of Economic and Management Sciences. Dept. of Accountancy.
    AFRIKAANSE OPSOMMING: Die vraagstuk wat in die studie ondersoek word, is of daar groter regsekerheid ten opsigte van die toepassing van die onderskeie inkomste-kapitaal riglyne by ontvangste in die Suid-Afrikaanse inkomstebelastingreg verkry kan word deur: i) die onderliggende gedagterigtings wat die formulering van die betrokke riglyne ten grondslag lê, te ondersoek en toe te pas; ii) die geformuleerde riglyne meer noukeurig te omskryf; iii) die toepassingsveld van die onderskeie riglyne te oorweeg: en iv) 'n psigologiese onderskeid te tref tussen die verskillende tipes subjektiewe ingesteldhede wat 'n individu kan openbaar en die tipe wat vir die inkomste-kapitaalriglyne relevant is, te identifiseer. In die oplossing van bogemelde vraagstuk word aan die volgende aspekte aandag geskenk: i) Die ontwikkeling en toepassing van die riglyne wat die howe in Australie, Nieu-Seeland en Suid-Afrika geformuleer het om 'n onderskeid te tref tussen ontvangste van 'n inkomste- en kapitale aard. Die ontwikkeling van die relevante riglyne in die Australiese en Nieu-Seelandse inkomstebelastingreg word oorweeg omdat: (a) die grondslag van inkomstebelasting in die lande wesenlik ooreenstem met Suid-Afrika; (b) die howe daar na dieselfde brongesag verwys as uitgangspunt vir die ontwikkeling van die riglyne om 'n onderskeid te tref tussen ontvangste van 'n inkomste- en kapitale aard; (c) die howe in Nieu-Seeland na gesag in Suid-Afrika verwys het by die toepassing van sekere riglyne om tussen ontvangste van 'n inkomste- en kapitale aard te onderskei; (d) die howe daar nuwe toepassings vir die bestaande riglyne ontwikkel het en die moontlikheid bestaan dat hierdie toepassings ook in Suid-Afrika aangewend kan word; en (e) die howe in die Suid-Afrikaanse inkomstebelastingregspraak al hoe meer na Australiese regspraak verwys as gesag vir hulle uitsprake. ii) Die standpunt dat die premis wat die riglynformulering deur die howe ten opsigte van die onderskeid tussen ontvangste van inkomste- of kapitale aard ten grandslag lê, inderdaad gebaseer is op 'n klassifikasie van die onderliggende transaksies wat die ontvangste genereer. iii) Die grondslag van voorgemelde riglyne, dit wil sê pas die howe die riglyne toe deur die subjektiewe ingesteldheid van die belastingpligtige in ag te neem, of word die riglyne bloot op objektief waarneembare feite gebaseer wat 'n aanduiding gee van die aard van die ontvangste, of is dit subjektief sowel as objektief. iv) Die relevante tipe subjektiewe ingesteldheid wat deurslaggewend is indien die subjektiewe ingesteldheid van die belastingpligtige 'n belangrike rol speel by die toepassing van die riglyne. 'n Samehangende metodologie word formuleer wat die howe en belastingpraktisyns kan aanwend om op 'n logiese en konsekwente wyse die relevante riglyn te identifiseer en toe te pas om die inkomste- of kapitale aard van die betrokke ontvangste te bepaal. Die aanwending van hierdie metodologie sal tot groter regsekerheid in die inkomstebelastingreg bydra omdat die identifisering en toepassing van die relevante riglyn op die feitestel in oorweging op 'n gestruktureerde en gefundeerde grondslag sal plaasvind.