Department of Accountancy
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Browsing Department of Accountancy by Author "Munzhelele, N. F."
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Item Open Access Basel III regulatory requirements and the performance efficiency and capital structure of selected listed African banks(2022-11-10) Obadire, Ayodeji Michael; Moyo. V.; Munzhelele, N. F.This study examined the impact of Basel III regulatory requirements on the financial performance, stability, efficiency, capital structure and risk-taking behaviour of selected listed African banks. The research hypotheses were formulated and tested using the Blundell and Bond system of Generalised Methods of Moment (GMM), pooled Ordinary Least Squares (OLS), Random Effects (RE), and Fixed Effects (FE) estimators. The study further used a panel data of 45 listed banks from six African countries that had adopted the Basel III Accord for the period 2010 to 2019. The system GMM estimator was used to estimate the impact of the Basel III regulatory requirements on the capital structure decisions of the selected African banks. Robustness tests were performed by using the two-step Blundell and Bond system GMM procedure. The robust results showed that the selected African banks were highly leveraged with a positive relationship between the Basel III minimum capital requirement, capital adequacy ratio, capital buffer premium and the bank leverage measured by the ratio of Tier 1 capital to total exposure. Furthermore, the study revealed that the bank specific capital structure determinant such as the bank size, asset tangibility and profitability had a significant and positive impact on African banks’ observed leverage and were important determinants of the discretionary capital. The trade-off, pecking order and agency cost theories were the three underpinning capital structure theories that complimentarily explained the financing behaviours of the selected African banks. Furthermore, the study used the pooled OLS, FE and RE estimators where appropriate to fit the models testing the impact of Basel III regulatory requirements on the financial performance, stability, efficiency and risk-taking behaviour of the selected African banks. Robustness tests were performed by conducting diagnostics tests such as the F- test, Breusch and Pagan test and the Hausman specification test. These tests were conducted to select the appropriate estimator amongst the pooled OLS, FE and RE estimators. To test the banks’ financial performance, the RE and FE estimators were used to fit the ROE and ROA models respectively whilst the pooled OLS estimator was used to fit the banks stability model. Moreover, to test the banks’ efficiency, vi the pooled OLS and RE estimators were used to fit the NIMR and OETA models respectively, whilst the RE estimator was used to fit the banks’ risk-taking behaviour models. Furthermore, the study showed that the capital adequacy ratio had a significant positive effect on the financial performance of the selected African banks, whilst the liquidity requirement was positively correlated to bank stability. In addition, the capital buffer premium had a significant positive impact on both measures of bank efficiency, whilst the liquidity requirements showed a more significant impact, and was consistent across all the three measures of the risk-taking behaviour of the selected African bank. The current study contributes to the body of knowledge in eight significant ways and most importantly proposes an optimum model and mix of regulatory capital requirements that can maximise the financial performance, stability and efficiency of the selected African banks.Item Embargo Formulation of weighted disclosure indices and its application in evaluating accounting disclosure and financial performance of listed firms(2024-09-06) Abasi, Alex Kwame; Oseifuah, E. K.; Munzhelele, N. F.This research studied listed firms in South Africa and Ghana. The purpose was to formulate two novel weighted disclosure indices for evaluating accounting disclosure in financial statements, and apply them in a multivariate regression analysis together with agency costs and economic value-added metric, to study listed firms on the Johannesburg Stock Exchange (JSE) and the Ghana Stock Exchange (GSE). This concept was motivated by the dearth of weighted disclosure indices in literature for measuring accounting disclosures. Two weighted disclosure indices have been developed and have been proposed to be used by researchers and practitioners, to evaluate the level of clarity or vagueness in financial statements disclosure and listed firms` compliance level to International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS). These newly-formulated methods were then applied to investigate the level of clarity or vagueness and compliance level of listed firms on the JSE and the GSE. Applying the scale scoring and dummy scoring techniques, and portfolio weight method, this study formulated these two novel weighted disclosure methods - WDIscales and WDIdummy - which can be used to evaluate both the clarity or vagueness and a firm`s accounting disclosure compliance level, using information disclosed in their audited financial reports, on their websites and on regulator`s website. Applying the agency theory, the study delved further and applied two agency cost variables, namely, expense ratio (agency cost1) and asset turnover (agency cost2), examined their relationship with the novel weighted disclosure indices, liquidity, and employed economic value added (EVA) as proxy for financial performance. The findings indicate a very strong positive significant correlation of 97% (GSE-54.1%) between WDIscale and WDIdummy. It also found a very strong positive significant 92% correlation between WDIscale and UDI as well as 92% (GSE-72%) correlation between WDIscale and PUDI. Further analysis found a positive significant 94% (GSE-81%) correlation between WDIdummy and UDI as well as positive significant 94% (GSE-81%) correlation between WDIdummy and PUDI. These confirms their consistency with the existing indices. The analysis found that firms that increased their disclosure clarity also increased their compliance levels. Findings derived from the descriptive statistics indicate that the mean weighted disclosure index scale score (WDIscale) was found to be 26% with 52% maximum score for JSE-listed firms and 34% mean for GSE-listed firms with 57% maximum score. The implication is that disclosure clarity is about 52% whereas vagueness constitutes 48% for JSE firms. This implies that information asymmetry account for about 48%. This means certainty represent 52%, but the 48% information asymmetry represent uncertainty to investors. For GSE-listed firms, the 57% clarity represent certainty in decision making for investors whereas the remaining 43% represent uncertainty and therefore information asymmetry. Conclusions drawn from these findings is that the JSE-48% and the GSE-43% vagueness indicate a reduced understandability of the financial statements. Comparative analysis of the mean weighted disclosure index dummy score (WDIdummy) found that JSE-listed firms scored 40% mean with 75% maximum score whereas GSE-listed firms scored 47% average with 70% maximum. The implication is that although GSE-firms recorded marginally higher average scale score, total compliance to reporting standards was higher (75%) among JSE-listed firms than GSE-listed firms (70%). Compliance level is therefore high in both contexts but clarity is not as high as compliance level. Consistent with prior studies, application of these disclosure indices found that disclosure clarity is low among listed firms. Again, it was found that liquid firms disclosed with higher levels of clarity and low levels of vagueness and firms audited by any of the global big four global accounting firms disclosed with higher clarity and their compliance level in terms of WDIdummy, PUDI and UDI were also higher. Firms with lower agency cost (higher asset turnover) tend to increase their level of financial disclosure. Consistent with agency theory, an increase in agency costs diminished liquidity, but lower agency costs increased liquidity. Consistent with the free cash flow theory, this study found that an increase in liquidity induced an increase in agency costs. Further and contrary to prior studies, the analysis found that agency cost1 does not reduce disclosure clarity nor disclosure compliance level, but liquid firms disclosed with higher levels of clarity and low levels of vagueness in conformance with the signaling theory. An increase in expense ratio (increase in agency cost1) leads to a decrease in asset turnover (an increase in agency cost2) and an increase in agency cost1 leads to an increase in financial distress. An increase in agency cost1 leads to a decrease in economic value added to investors` wealth. An increase in agency costs led to a decrease in market value added to firm value. But agency costs do not automatically impede financial performance. Firms audited by the global big four accounting firms tend to have lower agency costs. EVA was found to increase liquidity, increase return on capital employed and reduce the possibility of financial distress. An increase in liquidity was found to lead to an increase in economic value added. An increase in disclosure compliance was found to lead to an increase in EVA. Finally, although an increase in disclosure clarity was found to not increase EVA, an increase in compliance to IFRS and IAS was found to cause an increase in EVA.Item Embargo Strategies for promoting effective financial management practices in public schools: a case of Ehlanzeni District Mpumalanga Province(2024-09-06) Madalane, Kgothatso; Munzhelele, N. F.; Katekwe, G.Effective financial management practices are crucial for public schools to operate efficiently and achieve educational goals. However, many public schools in South Africa, particularly in rural areas, struggle with financial management due to limited resources and expertise. The aimed at identifying and evaluating strategies for promoting effective financial management practices in public schools in the Ehlanzeni district of Mpumalanga province. The study adopted a qualitative approach within the interpretative paradigm guidelines. A semi-structured interview was conducted with school principals, and questionnaires were administered to financial officers and SGB members to collect data. A purposive sampling method was used to select a sample of 30 participants from 10 public schools in the Ehlanzeni district. The study revealed challenges such as parental disengagement, skill gaps among school governing body members, lack of exposure to training, and limited fundraising in public schools within the Ehlanzeni District, Mpumalanga. Parental disengagement has caused a lack of oversight and accountability in public schools, leading to poor financial decisions and poor management of finances as a result. In response to these challenges, the study identifies a set of strategies aimed at promoting effective financial management practices. These include parental involvement strategies, training initiatives tailored to local needs, technology integration, community engagement events, financial literacy programmes, capacity building, regular internal audits, collaborative partnerships, and transparent reporting systems. These strategies are designed to enhance transparency, accountability, and financial literacy among stakeholders, thereby improving financial decision-making and management practices in public schools. By addressing these challenges and proposing actionable solutions, this research contributes to the body of knowledge on public school financial management in South Africa. It offers practical insights that can benefit public schools in the Ehlanzeni district of Mpumalanga province and serve as a model for improving financial management in similar contexts nationwide