Zimbabwe Stock Exchange Research Articles

Determinants of Share Prices of Agriculture Listed Firms

The stock market plays an important role in economic development by promoting capital formation and enhancing economic growth. The stock market is among the main sources of financing in the critical sector of the economy. Trading of securities on the Zimbabwe stock exchange facilitates savers and users of capital by fund pooling, risk sharing and transferring wealth. One of the important sectors of the Zimbabwean economy devoid of adequate financing is the agricultural sector. This sector has been experiencing several challenges over the period 2002 -2022 mostly from lack of sustainable finance especially from private investment. It is assumed that lack of funding is due to volatility of stock prices. The objective of the study is to analyze different factors affecting share price of agriculture sector listed firm on the Zimbabwe Stock Exchange using the panel regression model. Based on the random effect the study established that share prices are determined by earnings per share, price earnings ratio and return on equity positively impacts stock prices in Zimbabwe. The government should control inflation to ensure price stability to aid in easy financial planning. Further the governments should promote agricultural growth initiatives and strategies which would stimulate demand for agricultural oriented stocks.

Firm Characteristics and Corporate Governance Mechanisms as Drivers of Corporate Social Responsibility Disclosure in Zimbabwe

This study extends the literature on the determinants of voluntary disclosure of corporate social responsibility (CSR) in a sample of 61 annual reports from the Zimbabwe Stock Exchange for the year ended 31 December 2020. The purpose of the study is to determine why firms voluntarily disclose CSR and whether corporate governance mechanisms have an impact on firms’ disclosure policy. An unweighted disclosure index consisting of 30 corporate social responsibility attributes was developed; using content analysis to determine the level of corporate social responsibility disclosure. The results show that corporate social responsibility disclosure is low, with the most corporate social responsibility information disclosed being community involvement disclosure (40%), followed by environmental disclosure (30%), products and consumer information disclosure (29%), and human resources disclosure (28%). In addition, using multiple regression analysis and after accounting for size, leverage, profitability and industry, the findings indicate that board independence and board of directors’ qualifications have a significant positive influence on corporate social responsibility disclosure whereas ownership concentration was found to be insignificant. With the exception of profitability, all other firm characteristics, leverage, firm size and industry sector were positive and significant in explaining the variation in corporate social responsibility disclosure. It appears that profitable firms are not motivated to increase corporate social responsibility disclosure. This may be consistent with the shareholder wealth maximization approach which renders corporate social responsibility disclosures as less important. Financial markets in Zimbabwe may not be sufficiently efficient in penalizing firms for incomplete corporate social responsibility disclosure and that regulators may need to mandate such disclosures if information asymmetry is to be reduced and market efficiency enhanced.

Application of Copula Methods in Financial Risk Management: Case of the Zimbabwe Stock Exchange and the Victoria Falls Stock Exchange.

In order to minimize risks and create a safe investing environment, financial risk management is becoming more and more crucial for individuals, financial organizations, and even entire nations. Accurately assessing financial risks and using that information to inform wise investment choices can give an investor a competitive edge as well as significant returns. In actuality, real-world financial variables limit the ability to estimate financial risks. On the other hand, a wealth of data indicates that financial variables typically have asymmetric dependency, skewness, and fat tails. In three ways, the conventional approaches to financial risk management based on normally distributed hypotheses are put to the test by these stylized characteristics of financial variables. First, the univariate normal distribution or other elliptical distributions are unable to adequately fit the distribution of the univariate variable. Second, despite their straightforward tractability, multivariate variables’ extra kurtosis and skewness are not captured by their normal distribution. As a result, the dependence risks associated with multivariate financial variables may be underestimated. Finally, when the joint distribution of various variables is non-elliptical, linear correlation which is typically employed to characterize the dependence of various variables in traditional portfolio risk management is likewise insufficient. This research uses a promising technique based on copulas in conjunction with GARCH and realized volatility models to examine the risks associated with multivariate financial variables in order to address these issues. The multivariate distributions are constructed using copulas in conjunction with GARCH and Realized Volatility models which are then utilized to evaluate portfolio risks in financial market. The findings demonstrate that copula-based models outperform conventional models in fitting financial data. Second, a variety of marginal models have a notable impact on the value at risk of the portfolio, including the GARCH and realized volatility models. Lastly, both the dependence structure and the marginal distribution exhibit notable skewness. Consequently, compared to the normal or Student-t distribution, the skewed Student-t distribution fits some datasets better.

The Capital Structure Theory as It Relates to The Food Sector. A Developing Economy's Evidence

The study's objective was to investigate the capital structure theory in the food industry, focusing on manufacturing companies listed in Zimbabwe. By looking at these companies' capital structures, we aimed to pinpoint the factors influencing capital structure decisions in the food industry and provide managerial implications for businesses operating in this market. From 2017 to 2022, the study used Panel data from the financial statements of manufacturing companies listed on the Zimbabwe Stock Exchange and Victoria Falls Stock Exchange. The findings demonstrate the importance of business value and capital structure despite their negative relationships. For a variety of stakeholders, the study has value implications. This study offers managers in the food business insights into the variables influencing firms' capital structures, empowering them to make educated decisions about their financing options. The study can also be used by investors in this industry to assess the capital structure of businesses they are considering investing in, which will ultimately help them make more educated choices. Additionally, policymakers can use the study's findings to create policies that support the expansion and development of Zimbabwe's food business, thereby boosting that nation's economy.

Evaluation of Weak-Form Efficient Market Hypothesis in Zimbabwe Stock Exchange during Pandemic Period

Stock markets, just like other sectors of businesses have been impacted by the COVID-19 pandemic. COVID-19 has caused things to change in some sort; behavior, culture, and economy. Investors’ behavior and expectations may have been shaken. Huge stock market dislocations may have occurred as individual and institutional investors react to bad economic news. This paper evaluated the Zimbabwe Stock Exchange (ZSE) for evidence of a weak-form efficient market hypothesis in the context of a random walk model for the pandemic period. The study used low-frequency data (monthly) from January 2020 to February 2022 for its analysis. The study employed autocorrelation tests, unit root test runs tests, and variance ratio tests. The study found that the autocorrelation tests run tests and the variance ratio tests failed to reject the random walk hypothesis, while the unit root test have opposite results. Given that the variance ratio test is more powerful than the unit root test and that unit root tests have very poor power properties, the study concludes that the ZSE followed a random walk during the pandemic period. The study, however, believes that the efficiency of the stock market may have been attributed to inflation problems during the period. As inflation sours, the revenue growth becomes of nominal terms not real terms, hence actual returns in real terms become meaningless in the financial trade. The study recommended further development of the stock market to resemble those of developed markets with various trading products, greater participation, automation, and capitalization.

Environmental Reporting: Comparing Mining Companies Listed on the Zimbabwe Stock Exchange (ZSE) Against the Companies Listed on the ZSE and Externally

Environmental Reporting: Comparing Mining Companies Listed on the Zimbabwe Stock Exchange (ZSE) Against the Companies Listed on the ZSE and Externally

An Empirical Analysis of the Correlation Between Derivatives Usage and Firm Specific Factors in Zimbabwe

The research examined 45 firms’ derivative usage in relation to their financial gearing, size, liquidity, profitability, and solvency ratio. A logit regression model was run from the year 2019 to the year 2021. The logit model revealed at 99% level of confidence that, a firm’s derivative usage is significantly and positively related to its liquidity ratio as measured by cash and cash equivalents to total assets ratio. The study also revealed that usage of share options by firms listed on the Zimbabwe Stock Exchange had no significant relationship with financial gearing, firm size, profitability, and solvency ratio at 1% level of significance. Hence the study encourages firms to significantly improve on their liquidity positions prior to the issuance of employees’ stock options, in-order to provide robust safety nets for vesting. Keywords: Derivative usage, liquidity ratio, logit regression model, share options DOI: 10.7176/RJFA/13-24-08 Publication date: December 31 st 2022

The nexus between blockchain distributed ledger technology and financial crimes

Abstract: Purpose: The study sought to uncover the effect of blockchain digital ledger technology (BCDLT) on financial crimes. The study was driven by the need to promote blockchain technology in a bid to enhance financial sanity through elimination of financial delinquency. Research methodology: The study followed a quantitative paradigm using an explanatory research design. The study targeted financial executives, senior staff members at the Zimbabwe stock exchange, bankers and officials from the financial regulators. Data was collected using a structured questionnaire. Results: The study found out that of the four independent BCDLT antecedents, manual audit costs were insignificant, whereas the other three had strong positive associations with financial crime reduction. Limitations: The study targeted a specific group of financiers; hence the results may not be universal to other excluded categories Contribution: The study significantly guides policy formulation and laws in line with the adoption of the blockchain technology in the global financial system to guard against the possibility of new forms of financial crimes that could emanate from the use of technology. Keywords: 1. Blockchain digital ledger technology 2. Financial crime 3. Financial performance

Determinants of Corporate Social Responsibility: Evidence from the Zimbabwe Stock Exchange Listed Firms

The study's aim was to examine the level of corporate social responsibility disclosure and the determinants of corporate social responsibility disclosure by Zimbabwe Stock Exchange listed firms for the fiscal year ending December 31, 2020. The level of corporate social responsibility disclosure for all active firms listed on the Zimbabwe Stock Exchange was reviewed using content analysis. The findings show that corporate social responsibility disclosure is still very low, with community involvement disclosure accounting for 40% of all corporate social responsibility information disclosed, followed by environmental disclosure (30%), products and consumer information disclosure (29%), and human resources disclosure (28% ). A positive relationship between corporate social responsibility disclosure and board independence, leverage, industry affiliation, and firm size was discovered using a multivariate regression analysis, as well as a negative relationship with profitability and ownership structure. However, no statistically significant relationship was discovered between corporate social responsibility disclosure and the presence of an audit committee.

Assessing scope and nature of human capital management practised by Zimbabwe’s gold mining sector

Orientation: The article focuses on corporate social responsibility in the area of human resources management practised in Zimbabwe’s gold mining sector.Research purpose: This study aimed to assess socially responsible human resources management practised by Zimbabwe’s gold mining sector. The study also determines which among the five governance systems; local private, government-owned, listed on Zimbabwe Stock Exchange, multinational not listed and listed on foreign stock exchanges leads in this regard.Motivation for the study: Mining industries are usually labour-intensive. Corporate social responsibility and human resources management are indispensable components of mining companies.Research approach/ design and method: The study uses a multiple case study design with a population of 35 large-scale gold mining companies that are members of both Chamber of Mines of Zimbabwe and Mine Industry Pension Fund. Twenty-three companies participated in the study. The study uses mixed methods approach using a questionnaire and structured interviews to collect quantitative and qualitative data, respectively. Kruskal–Wallis rank test was used to test the differences in the governance structures’ performances.Main findings: The results indicate that gold mining companies exercise socially responsible human resources management and the listed on foreign stock exchanges have the highest index signifying best performance, followed by government-owned.Practical/managerial implications: The corporates can improve their social responsibility in human resources management by using the balanced scorecard to assess their own performances. The regulation prescribes most human resources management issues in the mining sector. Managers can benefit from the perceptions of the workers concerning how other governance structures implement socially responsible human resources management.Contribution value-add: This study contributes to the previous literature on socially responsible human resources management by illuminating the possible role played by governance structure in corporate social responsibility adoption. Theoretical perspectives of the firm, which are shareholder, stakeholder and societal, cannot act alone to explain the complex phenomenon of structure-conduct-performance in assessing the nature of socially responsible human resources management. Therefore, future research must combine the principles of these perspectives with concepts of the legal environment, board structure and managerial attitudes as determinants of the nature and scope of socially responsible human resources management.

Modelling of corporate exposure at default (EAD) in emerging financial markets: The case for counters listed on the Zimbabwe stock exchange (ZSE) in the dollarization era

This study explores the exposure at default (EAD) emanating from credit events undertaken by listed banking corporations trading on emerging markets, such as Zimbabwe’s Stock Exchange (ZSE) or Market in the dollarization era, namely period 2010-12. The dollarization of the Zimbabwean economy in 2009 coincided with the recovery of the global financial economy from the worst worldwide economic recession ever experienced in this world. The study used audited and published data drawn from financial statements of two banking corporations for the period 2010 to 2012 that were accessible on ZSE website. These data were presented and analyzed using Eviews7. The study revealed that there was a lot of non-performing loans drawn from EADs of banking corporations trading on the ZSE in the period under review. The study further noted that credit exposures issued by commercial banks in the period 2010-2012 were also exposed to risk from the nature of the borrowers, banks’ internal and external market variables. The variables that impacted on banks’ credit exposures include political, social, industrial, unemployment, technological challenges, state of financial markets, their capitalization and liquidity statuses. We therefore conclude that banks in emerging markets need to efficiently and effectively manage their credit portfolios in their desire to grow towards sustainable development. The study also concludes that banks in emerging markets that are into lending activities should adopt and implement financial econometric (EAD) models that are easy to apply, practical, pragmatic and adjusted for market friction. The study recommends that listed banking corporations in emerging markets need to adhere to the requirements of the Basel II and III Capital Accords if they are to make meaningful business out of their credit exposure operations. It also recommends that banks should come up with capitalization and investment strategies that suit their economic conditions if they are to grow and develop sizeable market shares and wealth from their lending businesses. Finally the study recommends that banks in emerging economies should adapt to international business standards, strategies, ethics and corporate governance parameters if they are to grow towards greater similarity with those in developed nations in their service delivery to the stakeholders and contribution to nation building and sustainable development.

On logit and artificial neural networks in corporate distress modelling for Zimbabwe listed corporates

Corporate financial distress prediction is a pivotal aspect of economic development. The ability to foretell that a company will be getting into financial distress is essential for decision-makers, shareholders, and policymakers in making the best decisions and policies for sustainable development. Prediction accuracy is of paramount importance in the implementation of distress mitigation measures, a critical component attracting investment in particular to most of the developing countries in Africa. The advent of the fourth industrial revolution saw Artificial Intelligence (AI) taking centre stage in financial risk modelling. This growth has however not precluded the role of traditional statistical methods in modelling financial risk. There is a lack of consensus amongst academia and practitioners on the accuracy of these two groups of methodologies in distress prediction. Protagonists of the conventional school of thought still hold on to statistical methods being more accurate whilst the new age proponents believe AI has brought in higher levels of predictive strength and model accuracy. This study seeks to compare the accuracy of Logit and Artificial Neural Networks (ANN) in corporate distress prediction. The two modelling techniques were applied to an 8-year panel dataset from the Zimbabwe Stock Exchange. The Logit model outperformed the ANN by an overall accuracy of 92.21% compared to ANN with 85.8%. Heightened prediction accuracy is bound to improve the return to shareholders by enhancing financial risk management within emerging markets. This study also seeks to contribute to the ongoing debate on the superiority between AI techniques and statistical techniques.

STOCK MARKET VOLATILITY IN ZIMBABWE STOCK EXCHANGE DURING PANDEMIC PERIOD

Volatility is essential to consider uncertainty surrounding investments in financial assets. For this reason, financial industry regulators, mutual fund managers, individual and institutional investors, and policymakers are concerned about volatility. Against this background, this paper investigates the volatility of returns on the Zimbabwean stock market between January 2020 and January 2022. We use the All Shares Index for Zimbabwe Stock Exchange (ZSE) for volatility analysis and perform the quantitative investigation using GARCH family models. According to the AIC and SIC criterion, we use the GARCH (1,1) model and perform a complete analysis considering the results obtained from EGARCH (1,1) and IGARCH (1,1) regressions. Results report persistence in volatility, showing that it takes time for the market to digest information into the prices fully, and the shocks to conditional variance take longer to die out. Also, an asymmetry exists, implying that bad news and good news impact differently on the stock market, and the magnitude of volatility due to the good news is higher than bad news. Therefore, we conclude that positive news of the same magnitude impacts more than bad news. Investors rely more on the good news for effective decisions during the pandemic to earn more. Considering the results, any policy aimed at reducing the impact of the pandemic is favorable for investment.

Information Flow Between the Zimbabwe Stock Exchange and the Johannesburg Stock Exchange: A Transfer Entropy Approach

The purpose of this paper is to determine whether there was information flow between the stock markets of Zimbabwe and South Africa during the time the Zimbabwean economy was dollarized. The author used econophysics-based Shannonian and Rényian transfer entropy estimates to establish the flow of information between the markets in tranquil periods as well as at the tails of return distributions. The only significant Shannonian transfer entropy estimate was from Johannesburg Stock Exchange (JSE) resources index to Zimbabwe Stock Exchange (ZSE) mining index. The findings show that the only significant tail dependence was between JSE All Share Index (JALSH) and ZSE Mining on the one hand, and between JSE Resources and ZSE Mining on the other hand. However, the magnitudes of the effective transfer entropy values are relatively low, showing that there are weak linkages between the Zimbabwe Stock Exchange and the Johannesburg Stock Exchange. The lack of significant information flows between the exchanges of the two countries offer opportunities to fund managers for portfolio diversification. From a government point of view, it is imperative that the tempo of economic and political reform be accelerated so that integration between the markets can be fast-tracked. Integrated markets will benefit Zimbabwe as this will reduce the cost of equity and accelerate economic growth.

Externalities of economic sanctions on performance of intra‐industry non‐sanctioned firms: Evidence from Zimbabwe

AbstractThis paper investigates the effect of targeted economic sanctions by the United States and the European Union on the performance of intra‐industry non‐sanctioned firms. Using data of non‐sanctioned firms listed on the Zimbabwe stock exchange during the period 2009–2018, our regression results show that non‐sanctioned firms in the same industry as sanctioned firms perform better than ordinary non‐sanctioned firms, signalling the positive competitive effect. A mediating test suggests that sanctions increase the market share of non‐sanctioned firms in the same industry as sanctioned firms and subsequently increase their performance.

Towards Ingenious Technology and the Robust Enforcement of Financial Markets Laws to Curb Money Laundering in Zimbabwe

Technology has positively contributed to the creation of financial markets and the facilitation of payments globally. The effective use of robust technology could enhance the consistent enforcement of financial market laws by curbing financial crimes in any country. This in turn would enhance the integrity of financial markets and promote the viability of financial markets. In relation to this, it appears that Zimbabwe has struggled to comply with international measures to combat money laundering and the financing of terrorism (AML/CFT) since it has poor financial market laws which are inconsistently enforced due inter alia to its poor money laundering detection mechanisms and inadequate resources. For instance, Zimbabwe has to date failed to make satisfactory progress to adopt and enforce adequate risk mitigation measures against money laundering practices in accordance with the Financial Action Task Force (FATF) recommendations. This is evidenced by the increased incidence of money laundering in Zimbabwean financial markets. Furthermore, the inconsistent enforcement of financial market laws has resulted in poor liquidity and the recent suspension of the Zimbabwe Stock Exchange (ZSE). The viability and integrity of the Zimbabwean financial market has thus been compromised. This article discusses the integration and use of robust technology in the Zimbabwean financial market to curb financial crimes such as money laundering and bank fraud. The adequacy of financial market laws and/or regulations will also be discussed vis-à-vis their consistent enforcement by relevant bodies such as the Financial Intelligence Inspectorate Evaluation Unit (FIU) in Zimbabwe. This is done to evaluate the use of technology to curb money laundering and promote a viable economy and financial market in Zimbabwe. It is submitted that the relevant authorities should promote the effective use of technological inventions like artificial intelligence (AI) and machine learning to curb money laundering, bank fraud and other related financial crimes in Zimbabwe.

An Analysis of the Predictors of Financial Distress for Zimbabwe Listed Corporates

This study brings novelty to the area of corporate distress modelling in Zimbabwe by exploring company-specific indicators of corporate distress, unlike most of the previous studies, which used financial performance indicators. Using a binary logistic regression on a time series dataset collated between 2010 and 2017, this study establishes book value, book value per share, average debt to equity and equity per share as very significant determinants of corporate distress on the Zimbabwe Stock Exchange (ZSE). Future studies incorporating artificial intelligence and a combination of both the traditional financial ratios and market-based indicators is recommended to expand the scope of the study.

Relevance of Corporate Social Responsibility to Companies During Turbulent Economic Times: A Survey of Zimbabwe Stock Exchange Listed Companies

Corporate Social Responsibility (CSR) has remained topical and contentious as various schools of thought are put forward on its relationship to cost versus profitability for businesses. This study explored the relevance of CSR and its effect on the survival of businesses during an economic meltdown in Zimbabwe. The study purposively sampled 31 companies that are listed on the Zimbabwe Stock Exchange and have sound CSR programmes. A total of 93 questionnaires were administered and a Chi-square was conducted to test and establish the relationship between CSR strategies and business survival. The study concluded that companies with CSR strategies had a higher chance of surviving during turbulent times. Following the findings of the study, it is recommended that government comes up with CSR policies for different industries and that organisations continue investing in CSR especially in times of economic challenges.

The Zimbabwe Code on Corporate Governance (Zimcode) and Financial Performance

ABSTRACT This paper examines the impact of a set of corporate governance provisions (CGI) as provided in the Zimbabwe Corporate Governance Code (Zimcode) and financial performance using a sample of 48 companies listed on the Zimbabwe Stock Exchange between 2013 to 2018. The Zimcode was introduced in 2015 in Zimbabwe and its main purpose was to curtail corporate scandals that had ravaged listed companies as a result of inadequate corporate governance compliance and was meant to augment the outdated colonial-era Companies Act of 1951. The study uses a market-based measure (Tobin's Q) and an accounting-based measure (ROA) as proxies for financial performance. A CGI is constructed using three dimensions: board, directors and ownership; accounting and auditing; and risk management. Least Absolute Value (LAV), Ordinary least Squares (OLS) with heteroscedasticity consistent standard errors and Fixed Effects estimators are used to examine if the introduction of the Zimcode has improved the financial performance of companies. The results show that the corporate governance reform in Zimbabwe through the introduction of the Zimcode did not significantly affect the financial performance of Zimbabwean companies. This might be a signal that the regulators need to overhaul the code or gravitate toward mandatory compliance.

Modelling of Corporate Exposure at Default (EAD) in Emerging Financial Markets: The Case for Counters Listed on the Zimbabwe Stock Exchange (ZSE) in the Dollarization Era

Modelling of Corporate Exposure at Default (EAD) in Emerging Financial Markets: The Case for Counters Listed on the Zimbabwe Stock Exchange (ZSE) in the Dollarization Era