Financial Leverage and Shareholder’s Required Returns: Evidence from South Africa Corporate Sector

Matemilola, Bolaji Tunde; Bany‐Ariffin, A.N.; Azman-Saini, W.N.W.

doi:10.1007/s11300-012-0214-x

Cited by 13 publications

(5 citation statements)

References 21 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Past researchers (see Rajan, Zingales 1995;Frank, Goyal 2008;Eldomiaty, Ismail 2009;Nunkoo, Boateng 2010;Matemilola et al 2012) use balance sheet and income statement data to conduct capital structure research. Similarly, we use balance sheet and income statement data to analyze adjustment to long-run optimal debt level predicted by dynamic trade-off theory.…”

Section: Methodsmentioning

confidence: 99%

Debt Financing and Importance of Fixed Assets and Goodwill Assets as Collateral: Dynamic Panel Evidence

Matemilola

Ahmad

2014

Journal of Business Economics and Management

View full text Add to dashboard Cite

This article analyses the effect of fixed assets and goodwill assets on South African firms’ debt ratios. The difference and system generalized method of moment estimation results reveal that fixed assets and goodwill assets have significant and positive relationship with firms’ debt ratios. To secure long-term debt, fixed assets and goodwill assets are required as collateral by creditors. Our results show firms’ adjust to long-run optimal debt level, but at a slow adjustment rate. Our results suggest there are costs preventing South African firms from adjusting faster to their long-run optimal debt level. The practical implication of the paper is that policy makers should promote policies that encourage further development of the capital market. Moreover, firms need both fixed assets and goodwill assets as collateral to raise the desired optimal debt that maximizes firm value.

show abstract

Section: Methodsmentioning

confidence: 99%

Debt Financing and Importance of Fixed Assets and Goodwill Assets as Collateral: Dynamic Panel Evidence

Matemilola

Ahmad

2014

Journal of Business Economics and Management

View full text Add to dashboard Cite

show abstract

“…Adding lagged dependent variable to the model specification makes the ordinary least squares method inappropriate, because ordinary least squares require the assumption that all the explanatory variables should be exogenous. Hence, GMM is the preferred method when lagged dependent variable is included in a model, because it maximizes an objective function that includes moment restrictions that the correlation between the error term and the lagged explanatory variable is zero (Nunkoo and Boateng, 2010;Matemilola et al, 2012).…”

Section: Model Specificationmentioning

confidence: 99%

International diversification and firm’s value: evidence from developing nations

Bany‐Ariffin

Matemilola

Wahid

et al. 2016

RIBS

View full text Add to dashboard Cite

Purpose This paper aims to evaluate the impact of international diversification, through the investment abroad activities of the Malaysian multinational corporations (MNCs), on their financial performance. Design/methodology/approach The paper applies the panel generalized method of moments (GMM) estimation technique that gives better results. Findings The empirical findings show that the move to invest abroad has brought a positive impact on Malaysian MNCs’ financial performance. However, in terms of a firm’s risk, the results contradict the general internationalization-risk hypothesis. Research limitations/implications The study focuses on the top 100 multinational firms; future researchers may extend the time period and use the entire sample of all the multinational firms. Practical implications Foreign investments offer rewarding returns due to cheaper labour and raw materials, competitive edge in terms of technological advancement and larger market opportunities. Originality/value The paper contributes to the literature using the panel GMM’s estimation that effectively control for reverse causality and serial correlation problem. The paper also contributes to the international diversification and performance relationship, in a fast-growing Malaysia.

show abstract

“…This implies that firms in South Africa retain more of their profit to reduce the need for external financing as predicted by the pecking order theory (Flannery & Rangan, 2006;Matemilola et al, 2012, Ramjee & Gwatidzo, 2012. On the other hand, the inverse and significant relationship between leverage and profitability indicates the presence of the dynamic trade-off theory.…”

Section: Empirical Results and Discussionmentioning

confidence: 96%

Banking Sector Development and Corporate Leverage: Empirical Evidence from South African Firms

Etudaiye-Muhtar

Ahmad²

2014

IJEF

View full text Add to dashboard Cite

The banking sector in Africa dominates the financial system which makes bank credit an important source of external finance for firms within the economy. For this reason, financial policy makers and regulators implement development measures in the banking sector to ease a firm's access to bank credit. This paper investigates the effect of banking sector development on capital structure decisions of publicly listed firms in South Africa with the use of a dynamic panel data estimator. We use the two-step system generalised method of moments (GMM) in the investigation and find that as the banking sector develops, publicly listed firms in South Africa use less debt in their capital structure. This is consistent with the notion that as the banking sector develops in emerging markets; the resultant risk management process which tightens lending process gives a better pricing for risk and makes the cost of bank credit higher. The policy implication for financial policy makers and regulatory bodies is that they should implement policies that will put in place an efficient risk management process which at the same time, reduces cost of bank credit.

show abstract

Financial Leverage and Shareholder’s Required Returns: Evidence from South Africa Corporate Sector

Cited by 13 publications

References 21 publications

Debt Financing and Importance of Fixed Assets and Goodwill Assets as Collateral: Dynamic Panel Evidence

Debt Financing and Importance of Fixed Assets and Goodwill Assets as Collateral: Dynamic Panel Evidence

International diversification and firm’s value: evidence from developing nations

Banking Sector Development and Corporate Leverage: Empirical Evidence from South African Firms

Contact Info

Product

Resources

About