Department of Accountancy

Permanent URI for this community

https://univendspace.univen.ac.za/handle/11602/1949

Browse

Browsing Department of Accountancy by Issue Date

Filter results by year or month
Now showing 1 - 10 of 10
  • Thumbnail Image
    ItemOpen Access
    The impact of the global financial crisis on the cash flow sensitivity of investment: some evidence from the Johannesburg Stock Exchange listed non-financial firms
    (2018-05-18) Munthali, Ronald; Moyo, V.; Mache, F.
    The relationship between a firm’s investment behaviour, financial constraints and the level of internally generated cash flows has been a subject of extensive discussion in finance literature. The discussion revolves around the effectiveness of investment cash flow sensitivity (ICFS) as a measure of financial constraints with contradicting conclusions. Empirical literature is also not in agreement about the best firm-specific proxy to distinguish firms into financially-constrained versus financially-unconstrained ones and the effect of the 2007 to 2009 global financial crisis on the ICFS of South African firms is still to be determined. There are very limited studies that have investigated ICFS in developing economies. This is important as institutional differences and capital market developments between developed and developing economies justify a separate study of South Africa as a developing economy. This study used data drawn from 131 Johannesburg Stock Exchange listed non-financial firms for the period 2003 to 2016 to establish the most suitable criterion for distinguishing firms into financially constrained versus unconstrained, to determine the effect of the 2007 to 2009 global financial crisis on the ICFS and to determine if ICFS is a good measure of financial constraints. The data for the 131 sampled firms was obtained from the financial statements on the IRESS database. The dataset was split into constrained versus unconstrained firms using three firm specific splitting variables: firm size, cash flow holding and dividends pay-out. The data was further split into panel 1 (2003 to 2006 covering the period before the global crisis); panel 2 (2006 to 2010 covering the period including the global financial crisis period) and panel 3 (2010 to 2016 covering the post global financial crisis period). The study utilised the system generalized moments method (GMM) regression model that yields consistent estimates even with unbalanced panel data sets and the Fixed Effects estimator. The models were both implemented on STATA 15 software. Samples split based on the dividend pay-out showed the highest ICFS for financially-constrained firms before, during and after the global financial crisis period. ICFS is highest during the period including the global financial crisis years compared to samples split using firm size and cash flow holding. The study concludes that dividends pay-out is the best criterion to distinguish firms into financially-constrained versus unconstrained; the global financial crisis constrained all firms; and that ICFS can be a good measure of financial constraints. The main limitation to the study was that it used a small sample size in relation to other international studies.
  • Thumbnail Image
    ItemOpen Access
    The impact of macroeconomic variables on the equity market risk premium in South Africa
    (2018-09-21) Obadire, Ayodeji Michael; Moyo, V.; Mache, F.
    The relationship between the Equity Market Risk Premium (MRP) and macroeconomic variables has been a subject of extensive discussion in the finance literature. The MRP is a central component of the main asset pricing models which are used to estimate the cost of equity which is mainly used in investment appraisal, performance measurement and valuation of equity assets. Past studies have identified inflation rate, interest rate, foreign exchange rate and political risk as the key macroeconomic variables that determine the size of the MRP. The test of the impact of these variables on the MRP have however been based mainly on data from developed countries and a few emerging countries. To the researcher’s knowledge, there are no studies that have investigated the impact of these macroeconomic variables on the MRP in South Africa. It is necessary to test the impact of these variables in the context of South Africa as these variables vary across countries. Using time series secondary data that was obtained from the SARB database, JSE database and World Bank database for the period 2002 to 2017, this study investigated the impact of these variables on the MRP in South Africa. A total of 192 observations per series of the inflation rate, interest rate, foreign exchange rate, political risk, JSE-ALSI and 91-days Treasury bill was used in the study. The data used were tested for possible misspecification errors that could arise from using a time series secondary data and the regression model was fitted using the Ordinary Least Square (OLS) estimator. The misspecification tests and models were both implemented on STATA 15 software. The results shows that inflation rate, interest rate and foreign exchange rate have a negative impact on the MRP whilst political risk has a positive impact on the MRP. Furthermore, the result shows that the inflation rate is the only variable amongst other variable tested that has a significant influence on the MRP for the study period. The study, therefore, concludes that inflation rate has the highest impact on the MRP in the context of South Africa. The study recommends that inflation rate should be monitored and kept within its target of 3-6% amongst other variables tested in order to increase investors’ confidence in the security market and also foster economic growth. The main limitations to the study were the limited data sources and insufficient funds.
  • Thumbnail Image
    ItemOpen Access
    Corporate Social Responsibility in the Banking Industry: A Comparative Study of South African, Nigerian and the United Kingdom Banks
    (2020-02) Tshiololi, Mpho; Moyo, V.
    The Corporate Social Responsibility (CSR) concept emerged in the 1960s as an attempt to link businesses with their surrounding society and environment. Over recent years, CSR has been recognized as one of the significant concepts that are prioritized in both academic and professional practices, and this concept has also aided companies to achieve sustainable competitive advantages within their respective industries. This study is aimed at evaluating the nature and level of CSR disclosure in the South African banking institutions in comparison to Nigerian and United Kingdom banking institutions. Secondly, it aims to investigate the determinants of CSR disclosure of the South African, United Kingdom and Nigerian banking institutions. The study used data collected from the integrated reports of South African, Nigerian and the United Kingdom listed banks during the period from 2010 until 2018. In line with the Branco and Rodrigues’ (2006 and 2008) disclosure index, the study used 23 items of CSR disclosure to conduct the content analysis of the bank’s integrated reports to evaluate the nature and level of CSR disclosure. The study also made use of the regression analysis to identify the determinants of CSR disclosure used by South African, United Kingdom and Nigerian banks. The data collected for the regression analysis was split into three panels, namely, South African banks, Nigerian banks and the full sample. To identify these determinants, the study utilized STATA 15 and the fixed effects and random effects estimators to fit the regression models. The results of the content analysis show that South African and the United Kingdom banks mainly focused on the disclosure of CSR information relating to Human Resources while the Nigerian banks mainly focuses on the disclosure of CSR information relating to Product and Customers. The study also found that the overall level of CSR disclosure between the three countries does not differ significantly. With regard to the determinants of CSR disclosure, the banks’ leverage and the number of board members appear to be the main factors that have either a positive or negative impact, on the CSR disclosure in the South African banks. For Nigerian banks, the age of the banks is the only factor that appears to have an impact on the disclosure of CSR information. Furthermore, this study also found that the age of the bank is the main factor that has a positive impact on the disclosure of CSR information of the full sample (combined South African and Nigerian banks sample). Other factors including, bank size, return on equity, and ownership concentration were found to have no significant impact on the disclosure of CSR information of either South African or Nigerian banks. The study is subjected to the limitations of using manual content analysis and the use of integrated reports as the only source of data collected for the study. This study contributes to the limited literature on CSR disclosure within financial institutions.
  • Thumbnail Image
    ItemOpen Access
    The Impact and Determinants of the Qualitative Characteristics on the Usefulness of Financial Reporting: Some Evidence from Selected JSE-Listed Firms
    (2020-05-20) Sinthumule, Orifha; Moyo, V.
    The objective of financial reporting is to provide useful information about, the financial position, financial performance and cash-flow position of an entity, to the users of its financial statements. For countries that have adopted the International Financial Reporting Standards (IFRSs), the International Accounting Standard Board (IASB) has set out the basis on how the financial statements should be prepared and presented. The IASB’s Conceptual Framework provides the principles and guidelines for the developments of the IFRS standards. Through the years, there has been a number of revisions to the conceptual framework that sought to improve the quality of the accounting standards and usefulness of financial reporting. According to the IASB’s Conceptual Framework (2018), for financial statements to be useful, they must possess all the qualitative characteristics of financial reporting. These qualitative characteristics of financial reporting, as outlined in the conceptual framework (2018) are - reliability (faithful representation) and relevance, which are the fundamental qualitative characteristics and the enhancing qualitative characteristics which are - understandability, comparability, verifiability and timeliness. The improvements on the conceptual framework are aimed at improving the usefulness of financial reporting. In South Africa, there are limited studies that have investigated the impact of the qualitative characteristics of financial reporting on the usefulness of financial reporting. The study used data collected from a total of 52 JSE-listed companies operating in the mining, retail and industrial sectors which are listed on the JSE; focusing on the periods 2006, 2012 and 2018 to investigate the impact of the qualitative characteristics of financial reporting on the usefulness of financial reporting. The findings of the study show that all the qualitative characteristics of financial reporting have an impact on the usefulness of financial reporting. Furthermore, the firm size, industry where the firm operated and the leverage of the firm – have an impact on the FEQC of financial reporting.
  • Thumbnail Image
    ItemOpen Access
    Testing the FAMA and French Five - Factor Model on the JSE - Listed firms
    (2021-06-23) Neluvhalani, Khathutshelo; Moyo, Vusani; Reynolds, Arthur
    The Capital Asset Pricing Model (CAPM) has its fair share of weaknesses and problems such as its well documented series of unrealistic assumptions. As a response Fama and French (1992) introduced the Fama and French three-factor model (FF3FM), but it remains unpopular among investors, practitioners and academics compared to the CAPM because it is deemed not cost effective and thought of as not being better than the CAPM. In 2015, Fama and French introduced the Fama and French five-factor model (FF5FM) that augmented profitability and investment into their FF3FM. Cakici (2015), Jiao and Lilti (2017), Foye (2018) and others have tested the five-factor model using data from their respective stock markets. The findings of these studies may not necessarily apply to South Africa because of institutional differences between countries. However, South African studies used different testing methods compared to this study. Therefore, given this background, this study sought to test the effectiveness of the FF5FM against the CAPM and the FF3FM in estimating stock returns on the Johannesburg Securities Exchange Limited (JSE Ltd). This study tested the performance of the FF5FM against the CAPM and the FF3FM using data from the JSE-listed firms. The study sought to find out if the FF5FM performs better than the CAPM and the FF3FM when estimating stock returns of JSE-listed firms. Specifically, this study tested the CAPM, FF3FM and FF5FM using all the JSE-listed firms to determine which model explains better the common variation and the cross section of expected future stock returns. In addition, the study investigated whether the value factor became redundant when the additional factors, profitability and investment were added to the FF3FM as per Fama and French (2015). Using the bespoke Generalized Method of Moments (GMM) of Hansen (1982) to carry out the regressions with data from the JSE for the period 2003 – 2019, the results show that profitability is a more reliable factor than investment in explaining share returns. The results also show that the FF5FM performs better than the other two models in estimating returns based on the assumption that most holding periods are significantly shorter than 16 years. Furthermore, the test results rejected the hypothesis that the value factor becomes redundant in explaining stock returns when more factors are added to the FF5FM.
  • Thumbnail Image
    ItemOpen Access
    The determinants of financial flexibility and investment efficiency: some evidence from JSE - Listed and Non - Financial firms
    (2021-06-23) Kayiira, Joseph; Moyo, V.; Munzhelele, Freddy
    Making and implementing financing decisions to achieve corporate objectives has been a challenging task for many corporate managers for decades. Achieving and maintaining financial flexibility, investment efficiency and ensuring the availability of funds for investment through payout policies are important financing decisions to maximise shareholder’s value. Financial flexibility is important as it determines the financing, investment and distribution policies of a firm and the firm’s payout policy determine the amount of capital available for investment. On the other hand, investment efficiency is fundamental in making strategic investment decisions as it requires that capital investment should only be allocated to profitable projects. Therefore, it is essential to understand the driving factors of these financial management aspects as there are no studies that have examined the impact of firm specific factors and payout policies on the firm’s financial flexibility and investment efficiency in Africa, including South Africa. To examine these financial management aspects, firstly, the study derived and tested estimation models of financial flexibility and investment efficiency in the context of the South African non-financial firms listed on the JSE Limited. Secondly, the study investigated the impact of selected firm-specific factors on the financial flexibility of the non-financial firms listed on the JSE Limited. It further analysed the impact of selected firm-specific factors on the investment efficiency of the non-financial firms listed on the JSE Limited. Lastly, the study examined the relationship between financial flexibility and investment efficiency of non-financial firms listed on the JSE Limited. A panel of 106 non-financial firms with complete data for periods from 2000 to 2019 was constructed and used in these tests. The research hypotheses were formulated and tested using the appropriate regression models selected from the Random Effect Model (REM), Fixed Effect Model (FEM) and System Generalized Method of Moments (GMM-SYS). The study shows that financial flexibility decreases with an increase in leverage, investment opportunities, payout and finance costs. However, it increases with profitability, cash and cash equivalents and asset tangibility. Based on the study, JSE-listed firms are financially flexible and the determinants of financial flexibility in these firms are leverage, Tobin’s Q, finance cost, dividends, profitability, tangibility and cash and cash equivalents. The significant factors that determine financial flexibility in the JSE-listed non-financial firms are Tobin’s Q and finance cost as they show a significant correlation with financial flexibility. On the v other hand, dividends, profitability, tangibility and cash and cash equivalents show an insignificant relationship. Also, the study shows that investment efficiency in the JSE-listed non-financial firms increases with leverage, payout, growth options, sales growth and cash flow. It, however, decreases with financial flexibility, firm age and size. The main determinants of investment efficiency in these firm are leverage, payout policy, growth options, sales growth, cash and cash equivalents, firm age and firm size.
  • Thumbnail Image
    ItemOpen 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.
  • Thumbnail Image
    ItemEmbargo
    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.
  • Thumbnail Image
    ItemEmbargo
    Efficacy of fraud triangle model in the detection of fraudulent financia reporting in South African Municipalities
    (2024-09-06) Tshikovhi, Ambani; Oseifuah, E. K.; Reynolds, A. B.
    The purpose of this study is to investigate the efficacy of the - Fraud Triangle Model - in the detection of fraudulent financial reporting in South African Municipalities. Fraudulent financial reporting and misappropriation of assets tend to undermine investors’ confidence in audited financial statements. Prior studies have reported the high financial cost of fraudulent financial reporting from municipalities and the subsequent impact on capital and financial markets. The Auditor General, South Africa, (AGSA) has lamented over the high number of irregular, fruitless and wasteful as well as unauthorised expenditure in South African municipalities, over the past decade. This study uses the fraud triangle model as the theoretical framework to investigate the underlying causes of fraudulent financial reporting in all 257 municipalities - Local, District and Metros - in South Africa over a six-year period - 2015/16 to 2020/21 financial years; the data was analysed using the binary regression model. The findings revealed that the fraud risk factors are correlated with the occurrence of fraudulent financial reporting. Additionally, the study found that the three fraud risk factors - pressure (proxied by financial leverage and liquidity), opportunity (measured by capital expenditure), and rationalization (proxied by total accruals and quality of external audit ) - have significant positive associations with the occurrence of fraudulent financial statements. The findings of the study provide new insights into the existing body of knowledge on financial statement fraud in the context of South African municipalities.
  • Thumbnail Image
    ItemEmbargo
    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