The impact of the selected macroeconomic indicators’ volatility on the performance of South African JSE-listed companies: a pre-and post- Covid-19 study

Abstract

The influence of macroeconomic variables on aspects of business and the country's economy has been a subject of robust discussion. This study was conducted to identify the effect of macroeconomic variables, namely inflation rate, economic growth, exchange rate and share price, on listed companies in South Africa. The goal was to study the long run and short run effects of macroeconomic volatility on company performance because of the world’s recent pandemic experience. To achieve this objective, the study applied the panel Autoregressive Distributed Lag (ARDL) model on annual panel data from 2010 to 2020 to analyse the short run and long run effects of macroeconomic variables on a company’s performance. The study results suggested a positive impact of economic growth, exchange rate and share price on asset returns, whilst a company's equity return is supported by economic growth and share price in the long run. The short run revealed that none of the independent variables has a sufficiently significant effect to influence a company's performance changes in the short run. Based on the findings, it was recommended that policymakers and economic authorities should introduce and implement strategies that favour and enhance the country's economic growth and stable exchange rate in order to improve company performance. Additionally, given that the company's short-run performance may highly depend on internal factors such as corporate governance, internal policies and business strategies, these decisions should be taken with precaution and a high level of professionalism.