Unveiling the quantitative impact of capital structure on firm value: A study of manufacturers of food, produce companies in South Africa

The purpose of this study was to examine the extent to which South African listed companies trading on the Johannesburg Securities Exchange (JSE) are complying with IT governance imperatives in the context of the King III Code of Corporate Governance. Management information systems and usage of computers are now embedded in business processes to the extent that most firms will be dysfunctional should these tools become unavailable. The underlying theoretical setting for this study is anchored on the agency theory and the Porter’s competitive five forces model. Since there were inadequate constructs on the subject, a combination of research methods were used: desk-top review, exploratory study, and content analysis, by reviewing the annual financial statements of fifty JSE-listed companies (the main board) in South Africa. The general outcome of the study was that JSE-listed companies in South Africa were compliant with IT governance practices as prescribed in the King III Code of Corporate Governance. Most JSE-listed companies in South Africa utilized both generic and bespoke or owned-designed IT governance frameworks to meet IT governance requirements. The study also revealed that issues relating to IT governance were among priority issues for South African listed companies. The study concludes that JSE-listed companies in South Africa have indeed fulfilled their fiduciary responsibility towards IT governance.

Avoiding Distortion in Corporate Valuation Litigation: An Application of Discounted Cash Flow

Purpose: The purpose of the study is to investigate and analyse the effective functioning of audit committees at the largest listed companies in South Africa.Problem investigated: The modern audit committee is often seen as the panacea of the corporate world and as such is looked upon to cure all the financial reporting and control-related problems of entities. Audit committees are, however, not always as effective as they are held to be, as is evidenced by the many well-known corporate scandals and business failures that occurred where audit committees existed and fraudulent financial reporting, audit failures, internal control breakdowns and other irregularities prevailed. The modern audit committee will be of value only if it is properly constituted, is functioning effectively and if its role is clearly understood by all the parties concerned. The research problem investigated stems precisely from this issue, and the paper therefore aims to analyse the effective functioning of the audit committees at the largest listed companies in South Africa. Methodology: The study empirically tested the audit committee practices at the largest listed companies in South Africa. This was done through questionnaires addressed to the CFOs and audit committee chairs. Findings: The study found that audit committees at the largest listed companies in South Africa are well established, properly constituted, have the authority and resources to effectively discharge their responsibilities and consist of members who act independently and who have the right mix of appropriate experience, financial literacy and financial expertise amongst their members. The audit committee's role was found to be generally well understood and supported by the board and the Chief Financial Officers. It was further found that the audit committees are effective in discharging their oversight responsibilities on the board's behalf, with the only real exception being their effectiveness regarding IT-related aspects. Value of research: The study provides valuable information on audit committee practices and the effectiveness of audit committees at the largest listed companies in South Africa. These findings can therefore serve as guidelines for best practice standards for audit committees at other companies and institutions. Conclusion: Audit committees at the largest listed companies in South Africa were found to be well established and according to the views of the CFOs and audit committee chairs to be functioning effectively. Further research regarding the subject field of audit committees should focus on the status and effective functioning thereof at smaller companies, unlisted entities, higher education institutions and public sector entities.

This study aims to examine the capability of capital structure as a mediator in the influence of liquidity, profitability, and asset growth on firm value. In this research, liquidity is proxied by CR and OCFR, profitability by ROA and ROE, and asset growth by CAG and FAG. Capital structure is proxied by DER and DAR, while firm value is proxied by Q Tobin and PER. The research sample consists of 19 companies listed in the LQ45 index during the period 2020-2022. Data analysis was conducted using the PLS 3.0 application, which indicates that liquidity and asset growth have a positive influence on firm value, while capital structure has a negative influence on firm value. Profitability does not have a significant influence on firm value. Additionally, liquidity has a negative influence on capital structure, while profitability and asset growth do not have a significant influence on capital structure. Capital structure can act as a mediator in the influence of liquidity on firm value, but does not act as a mediator in the influence of profitability and asset growth on capital structure.

Article history: Received January 22, 2013 Received in revised format 26 April 2013 Accepted 20 May 2013 Available online May 26 2013 This paper presents an empirical study on the effects of various factors on firm value including capital structure, firm size, asset growth, etc. The proposed study gathers the necessary information from selected firms listed on Tehran Stock Exchange over the period 2006-2010. In our study, all firms maintained the same fiscal calendar and there were active during the period of study. The results of our study indicate that there was a meaningful relationship between capital structure and firm value. In addition, there was a meaningful relationship between asset growth and increase on firm value. However, our study did not show any meaningful relationship between firms’ size as well as revenue growth and firms’ value. © 2013 Growing Science Ltd. All rights reserved.

Background: Corporate social responsibility (CSR) disclosure is widespread among the largest companies in South Africa due to the listing requirements of the Johannesburg Stock Exchange (JSE). These companies have also increasingly pursued external assurance of their CSR disclosures in recent years. The increased regulation of CSR disclosure and the increased rate of obtaining assurance of these disclosures motivated us to perform our study.Aim: To examine the association between CSR reporting, including both CSR disclosure and CSR assurance, and firm value of large South African companies.Setting: The JSE listing requirements place South Africa, the setting for our study, at the forefront of corporate governance and CSR reporting.Method: Tobin’s Q is used as a measure of firm value. Three measures of CSR disclosure and three of CSR assurance are used in this study. The measures are based on data collected by Klynveld Peat Marwick Goerdeler (KPMG) International on the CSR reporting practices of large South African companies. The sample period for this study coincides with the sample period covered in the KPMG surveys conducted during 2008, 2011 and 2013.Results: No significant association is found between CSR disclosure and firm value. However, a significant negative association is found between CSR assurance and firm value. Additional analysis found that the negative association between firm value and CSR assurance is more significant for companies that are not listed on the Socially Responsible Investment (SRI) index.Conclusion: The results found between CSR disclosure and firm value may suggest that firm value is unaffected by CSR disclosures. Taken together, the findings on CSR assurance and firm value and the additional analysis may suggest that in South Africa managers with negative CSR issues are more likely to obtain assurance on their CSR disclosure. The findings may be of interest to regulators when considering current and future disclosure and assurance requirements for CSR reporting in South Africa, as well as other parts of the world, shareholders when considering investment options, and managers when considering the benefit of certain CSR reporting practices.

The aim of this study is to establish the impact of social media, information sharing and knowledge sharing on firm performance among companies in South Africa, Gauteng province in particular. In as much as the issue of social media communication has received great benefits and growth within organisations, little has been researched about the impact of social media on job performance, knowledge sharing and information sharing among companies in the Gauteng province, South Africa. Social Identity Theory (SIT) has been used to explain the associations in the model. Questionnaires were distributed to both management staff and lower level employees in the companies in Gauteng province of South Africa. This study used a quantitative research methodology using Smart PLS software. This software was employed to test the relationships among the four hypotheses. The results showed that there is a positive and significant relationship among the four proposed hypotheses. Basing on the findings of this research, recommendations were made to both the top-level employees and lower level employees in the companies in South Africa. This study is expected to have real-world and academic implications to policymakers for the companies in South Africa. On top of this, the study will provide new insights and added first-hand knowledge to the existing body of literature which is meagre in South African companies.

Since the dawn of democracy in South Africa in 1994, transformational policies such as black economic empowerment (BEE) and affirmative action (AA) have increasingly and inextricably become part of the everyday political, economic and social life of its populace. As a result, South African businesses are subject to a whole array of mandatory regulations which ostensibly influence their operational capabilities to effectively and efficiently compete in national and global markets. In a survey of the largest 500 (including the top 100 JSE listed) companies in South Africa, it appears that transformational policies are positively supported and endorsed, although their impact on the operational competitiveness of these companies is largely unclear and unknown. A number of warning signs, however, are now being detected from reports in the popular media and in the academic literature about the possible negative consequences of such policies. BEE malpractices, which basically result in the continuation of past injustices against the majority of poor and unskilled people of the country, are becoming increasingly evident. Even more alarming is the fact that the corruption, nepotism and self-enrichment that accompany most BEE transactions are attributed to the ruling ANC political elite.

The optimal capital structure and value of a company is in constant evolution, taking into account both the external and internal environment. This study examines company-related determinants of capital structure and investigates whether the 2008 financial crisis exerted any significant influence on the capital structure and the identified determinants in a sample of top 40 JSE Ltd listed companies in South Africa. A panel regression model was applied to identify the most significant capital structure determinants and variance in them. Panel regression accounts for cross-sectional data and time series data simultaneously. It was found that the 2008 financial crisis did not exert a significant difference on the capital structures of the sample companies. The most significant company-related determinants of capital structure before the 2008 financial crisis were risk, tangibility and profitability. Risk and tangibility had a stronger influence on capital structure after the 2008 financial crisis but profitability became insignificant. The significant factors should be closely monitored to detect change in capital structure and the valuation of a company.

This study aimed to determine the effect of operational efficiency on financial health of non-life insurance companies in South Africa. Operational efficiency refers to an insurer’s ability to deliver its services while minimizing costs and maximizing profitability. A descriptive research design was used to achieve the objective of this study. The panel data from 2008–2019 used secondary data sourced from S&P Capital Q and Refinitiv Eikon, well-known databases with readily available data. The population of this study focuses on 32 non-life insurance companies with measurable markets of 57 domestic non-life insurance providers in South Africa. Data were analyzed using Fixed-effect regression, (Random-effect GLS regression, correlation, and the Hausman test. The result reveals that of all the variables, only premium growth correlates significantly (negative correlation) with financial health. This could be a result of a specific investment that resulted in a lower rate than that of a risk-free security. It is also important to note that a negative premium does not always indicate a problem. This can happen due to cancellations of reinsurance, reinsurer closures, paid off reinsurance ahead of time, under- pricing policies, inadequate reserves, high claim frequency, operational inefficiencies, investment losses, inadequate risk assessment, economic downturn, regulatory changes, catastrophic event, and any other events. It is essential for non-life insurance companies to carefully manage their underwriting practices, risk assessment, pricing strategies, and investment portfolios to avoid negative premium situations and maintain financial health.

This study investigates the impact of profitability on firm value, with capital structure serving as a mediating variable and firm size as a moderating variable, focusing on companies listed on the Indonesia Stock Exchange's IDX30 index from 2018 to 2022. A quantitative approach is employed to examine the causal relationships, utilizing secondary data from the financial statements of each company, which were sourced from the firms' official websites or the IDX website. A non-probability sampling method was used to select the companies from the IDX30 index during the specified period. The analysis was conducted using panel data, with descriptive statistics and conditional process Hayes analysis performed through SPSS25 and the Hayes Process. The results reveal that profitability has a positive and significant effect on firm value, while also demonstrating a negative and significant impact on capital structure. Furthermore, capital structure positively influences firm value and mediates the relationship between profitability and firm value. Additionally, firm size moderates the effect of profitability on firm value and the impact of capital structure on firm value. These findings provide insights into the interconnected roles of profitability, capital structure, and firm size in determining firm value among IDX30 index listed companies.

This research provides an investigation into the impact of Broad-Based Black Economic Empowerment (BBBEE) on the risk and returns of listed and delisted property companies on the Johannesburg stock Exchange. The study was investigated to understand the impact of BEE Property Sector Charter and effect of government intervention on property listed markets.The study examines the performance trends of the listed and delisted property companies on the Johannesburg Stock Exchange from January 2006 to January 2012. The data was obtained on McGregor to compute the risk and return measures of the listed and delisted property companies. The study employs a capital asset pricing model (CAPM) to derive the alpha (outperformance) and beta (risk) to examine the trend amongst the BEE and Non-BEE companies, Sharpe ratio was also employed as a measurement of performance. A comparative study is employed to analyse the risks and returns between listed property companies that are BBBEE compliant and BBBEE non-compliant. The study creates a dummy variable to rank BBBEE ratings to test whether there is a correspondence between BBBEE levels of the listed and delisted property company and its risks and returns. Results show that there exists differences in returns and risk between BBBEE compliant firms and non- BBBEE compliant firms. The study shows that non-BBBEE firms have higher returns that BBBEE firms and are less riskier than BBBEE firms. By establishing this relationship, this possibly affects the investor’s decision to invest in BBBEE companies versus non- BEE companies. This can assist the government in strategically adjusting the policy.

The objective of this study is to evaluate influence of growth potential, profitability, company size, ratio between capital structure and its target, short-term loan, asset maturity, growth of GDP and inflation rate towards capital structure SOA. The study involved secondary data in the form of financial reports from manufacturing companies listed in Indonesian Stock Exchange (ISE) published in ISE website, www.idx.co.id , and National Bureau of Statistics data about Indonesian economy published in www.bps.go.id , National Bureau of Statistics. From the result of partial adjustment model estimation, significant leverage lag shows that Indonesian manufacturing companies adjust their capital structure towards target leverage with SOA of 64.73% per year. This finding confirms in Darminto and Manurung (J Bus Manag 1(1):35–52, 2008) that capital structure SOA of Indonesian companies is relatively faster than that in the developed countries like USA (30%) (Flannery and Rangan in J Financ Econ 79(3):469–506. http://doi.org/10.1016/j.jfineco.2005.03.004 , 2006). Capital structure SOA of manufacturing companies in Indonesia is similar to Ramjee and Gwatidzo (Medit Account Res 20(1):52–67, 2012)’s study on capital structure SOA of manufacturing companies in South Africa (between 62.3 and 65.5% per year). Originality of this study is capital structure measurement used in the study. Until recently, two major theories, trade-off theory and pecking order theory, have been used to explain capital structure of companies. Previous studies evaluated both theories separately. This study is based on “dynamic trade-off theory” in which the trade-off theory and pecking order theory are evaluated simultaneously instead of partially.

This study aims to determine the effect of Liquidity, Profitability, Capital Structure, Asset growth, and Firm size on the Firm value of Food and Beverage Sub-Sector Companies listed on the Indonesia Stock Exchange (IDX). The sampling method used is purposive sampling. The sample selected was 12 food and beverage sub-sector companies listed on the Indonesia Stock Exchange (IDX) from 2011-2020. The data used in the financial statements of each sample company was published through www.IDX.co.id and www.financeyahoo.com. The analytical method used in this study is a quantitative method, with classical assumption testing and statistical analysis, namely multiple linear regression analysis using a random-effects model with the help of Eviews10. The results of this study indicate that Liquidity and Capital structure have a positive and insignificant effect on firm value partially. Profitability, Asset growth, and Firm size have a positive and significant impact on firm value partially. Dividend policy cannot moderate the influence of the relationship between Liquidity, Profitability, Capital Structure, Asset growth, and Firm size on Firm Value. Keywords: liquidity, profitability, capital structure, firm growth, firm size, dividend policy, firm value.

This study investigates the effect of profitability, asset growth, and firm size on firm value, with capital structure as a mediating variable in Indonesian manufacturing companies. The research aims to determine whether internal financial characteristics influence firm value directly or indirectly through capital structure decisions. Using a quantitative, causal-comparative approach, data were collected from 30 basic and chemical manufacturing firms listed on the Indonesia Stock Exchange during 2021–2024. Multiple linear regression and Sobel tests were applied to analyze causal relationships among variables. The results reveal that profitability positively and significantly affects capital structure, whereas asset growth and firm size do not show significant effects. However, profitability, asset growth, and firm size do not significantly influence firm value either directly or through capital structure. The Sobel test further indicates that capital structure does not mediate the relationship between profitability and firm value. These findings suggest that firm value in the Indonesian manufacturing sector is more influenced by factors outside the tested model. The study supports the pecking order theory, highlighting that profitable firms tend to rely on internal funding rather than external debt to sustain firm value.