Search Results (31)

This study examines the impact of Environmental, Social, and Governance (ESG) disclosures on the firm valuation of non-financial firms listed in South Africa, using Tobin’s Q as a firm value proxy. Using a panel data approach of 642 firm-year observations from 2017 to 2022, the study applies Fixed Effects, Random Effects, and Generalized Method of Moments (GMM) estimators to address possible endogeneity concerns. The results consistently show that, for the whole sample, ESG disclosures are positively and significantly related to firm value, thus supporting the view that markets reward transparency and sustainability initiatives. Firm size and liquidity also have positive impacts, while financial leverage has an inverse relationship with firm value. Subgroup regression analysis shows significant sectoral differences: ESG disclosure in non-manufacturing companies has a positive and significant relationship with firm value, in line with stakeholder and signaling theories, emphasizing the premium for intangible assets like reputation and trust. However, in manufacturing companies, ESG disclosure is negatively and significantly associated with firm value, implying concerns among investors regarding compliance costs, strategic misalignment, or possible “greenwashing.” The study contributes to the emerging-market literature by (i) introducing a PCA-based ESG index specific to JSE-listed non-financials, (ii) triangulating results across static and dynamic specifications to ensure robustness, and (iii) uncovering sectoral heterogeneity that has been largely overlooked. The research also has practical implications for corporate managers, policymakers, and investors on the alignment of ESG practices to industry attributes for long-term value optimization. Full article

Investor sentiment has increasingly been recognized as a behavioural factor influencing asset prices beyond traditional rational asset pricing models, yet evidence from South Africa’s property remains limited. This study investigates the short-run and long-run relationship between investor sentiment and FTSE/JSE-listed property indices, to determine the influence of sentiment on property index pricing within the South African context. Using monthly data for selected JSE/FTSE property indices, a composite investor sentiment index was constructed through a principal component analysis (PCA) of multiple market-based sentiment proxies. Consequently, a Vector Error Correction Model (VECM) was estimated to examine both the long-run and short-run relationships, integrated with the VEC Granger causality tests to determine the direction of influence between variables. The findings report a novel relationship between investor sentiment and the FTSE/JSE property indices, as they provide new insights at the disaggregated level, which is overlooked in the literature. In the short run, the findings suggest that market psychology drives short-term property price adjustments. Moreover, in the long run, the relationship remains significant, indicating that this effect persists, underscoring the enduring influence of sentiment on market valuation. Additionally, the Granger causality results indicate uni-directional relationships, where investor sentiment drives listed property pricing and macroeconomic variables, reinforcing its predictive role. The study concludes that investor sentiment is a key determinant of South Africa’s listed property market, consistent with the rationale of behavioural finance theory, and underscores that investment decisions within this market are substantially influenced by investor psychology, contributing to property market volatility. Full article

The global fight to mitigate greenhouse gas emissions and address climate change demands that firms implement energy-saving strategies while maintaining firm financial performance. However, the impact of energy efficiency on corporate financial performance remains underexplored, especially in South Africa. This study applied a two-step system generalized method of moments (SGMM) to explore the impact of energy efficiency on the financial performance of higher polluters and emitters listed on the Johannesburg Stock Exchange (JSE) over the period from 2015 to 2023. The sample for the study was 58 companies listed on the JSE. The data was sourced from the firm’s annual reports covering the period of 9 years (2015–2023). Our study reveals no significant association between energy-saving strategies and firm financial performance within high-polluting and emitting firms listed on the JSE. Notably, the study reports that leverage positively affects both firm profitability and market valuation, suggesting that debts may serve as a dynamic capability for improving firm performance if it is used strategically. Our findings underscore the importance of mandatory independent assurance of ESG reports to mitigate greenwashing risks. Full article

Employers in South Africa are mandated by labour laws to implement systems of work for the maintenance and promotion of health and safety at work. In response, companies have adopted and implemented occupational health and safety management systems (OHSMSs) whose effectiveness should be continuously monitored through performance measurement. However, there remains no national convention on the specific performance measurement indicators for companies to use. The objective of this study was to determine, characterise and compare lagging indicators adopted and reported by the top 150 Johannesburg Stock Exchange (JSE)-listed companies in South Africa. This qualitative study evaluated annual reports and data books from these companies by analysing textual data through qualitative document analysis. Only 87 of the 150 case companies reported performance using lagging indicators. The basic materials, consumer goods, consumer services and industrial sectors had the most companies which reported performance metrics. Fatality count and lost time injury frequency rate (LTIFR) were the most commonly reported performance metrics and were reported by 64 and 41 companies, respectively. There was variation in the number, type and form of adopted lagging indicators by the case companies. Companies in the manufacturing and mining sectors were more likely to report OHS performance, in general, than those in other sectors. The observed variation across sectors emphasises the need for harmonised indicators to measure and report OHS performance in South Africa. Full article

Understanding the role of liquidity and leverage is crucial in assessing financial performance, particularly in the consumer goods sector. This study examined the impact of liquidity and leverage on financial performance, using a sample of 13 consumer goods firms listed on the Johannesburg Stock Exchange (JSE) from 2014 to 2024. Despite the present literature on this association, few traceable studies have investigated this phenomenon, and there is a dearth of literature in this sector. The dependent variable for this study was financial performance, and the return on assets (ROA) was employed as a proxy for financial performance. The independent variables employed for this study were liquidity (LIQ), leverage (LEV), and the quadratic term of leverage (LEV2). However, Net profit margin (NPM), inventory turnover (INVT), average collection period (ACP), firm size (FS), and its quadratic term (FS2) were the control variables. The researcher performed the Durbin–Wu–Hausman test, the Breusch–Pagan LM test, redundant fixed effect testing, the Hausman test, and the panel heteroskedasticity LR test before employing the suitable model. After employing the panel least squares (PLS), the fixed effects (FE) model was considered appropriate and efficient for this study. Applying the model, the researcher found a statistically significant and positive impact of LIQ, LEV2, NPM, and FS2 on ROA. Furthermore, a statistically significant and negative impact of ACP on ROA. However, the impact of LEV and FS was negative and statistically insignificant on ROA. Furthermore, the impact of INVT on ROA was statistically positive and insignificant. To improve the financial performance of the firms efficiently, this study recommends that financial managers of consumer goods firms should pay special attention to maintaining and monitoring a healthy liquidity ratio and implement sound working capital management. Furthermore, integrate the strategic liquidity planning into their financial decision-making. The findings highlight that while a moderate level of leverage might not increase financial performance, a strategic increase in debt to a certain optimal level can improve the financial performance of a firm. Full article

This study investigates the behavior of South African stock prices during divestment periods using mixture distributions. Divestment often triggers significant market reactions, necessitating a deeper understanding of stock return distributions in such events. Given the complexities of emerging markets like South Africa, this research models stock price behavior to assess associated risks. A mixture distribution approach is employed to capture the return dynamics of stocks listed on the Johannesburg Stock Exchange (JSE) between 2015 and 2024. Gaussian Mixture Models (GMMs), Lognormal Mixture, and Student’s t mixture models are applied to financial, technology, and energy stocks affected by divestment. Statistical tests including AIC and BIC assess the model performance. Mixture distributions outperform single-distribution models, effectively capturing heavy tails, volatility clustering, and asymmetry in stock returns. The GMM and Student’s t mixture models provide the best fit, revealing increased volatility and extreme negative returns following divestment events. Mixture distributions offer a robust framework for modeling South African stock prices during divestment periods. These models enhance the understanding of market dynamics, supporting better financial modeling and risk management in emerging markets. Full article

The relationship between ESG and firm performance is complex and tends to yield mixed results globally. In South Africa, ESG implementation is still in its infancy stage due to economic and developmental challenges. Despite these challenges, the JSE introduced sustainability disclosure guidelines in 2022 to enhance ESG adoption in South Africa. Thus, the study seeks to understand the impact of ESG and firm size on the financial performance of JSE-listed firms in South Africa. The study utilised the JSE Top 40 firms for the period from 2002 to 2022. Furthermore, the study employed a two-step System Generalised Method of Moments, to estimate the impact of total ESG and individual dimensions of ESG on firm financial performance. Additionally, the study examined the moderating effects of firm size on the relationship between financial performance and ESG. The results revealed a positive and significant relationship between total ESG and firm financial performance. However, the findings regarding individual ESG dimensions and firm performance are mixed. Firm size has a moderating effect on the relationship between ESG and firm financial performance. The implication of these findings for South Africa is increased foreign direct investment from green investors and listed firms seriously considering ESG in their operations. Full article

The purpose of this study was to detect from the literature the roles of the Government, investors, and regulators in ESG implementation in South Africa from 2002 to 2022. ESG implementation in South Africa ensures sustainable business practices are adopted by firms operating within the country. The study used a scoping review methodology, with only articles in the English language being considered. A pilot search was carried out to identify key search phrases to be included in the search strategy. A total of 208 articles were identified and only 34 articles were eligible for the study. The results show an increase in ESG implementation by institutional investors, although investor activism is still low in South Africa. The South African Government actively enacted laws and regulations that supported ESG implementation after the global financial crisis of 2007–8. However, in recent years, there has been a lack of hard laws to support the non-legislative ESG rules that dominate ESG reporting. The study shows that the South African Government should improve its ESG laws for effective ESG adoption and avoid relying on the JSE, which enforces the King Code as a mandatory listing requirement to monitor ESG implementation. Training, capacity building, and active Government participation are critical for effective ESG implementation in South Africa. Full article

The stability of financial markets is influenced by the strength and transparency of companies listed on stock exchanges. This paper explores how financial, non-financial, and macroeconomic factors influence delisting likelihood among companies listed on the Johannesburg Stock Exchange (JSE), addressing a limitation in the current body of knowledge that often overlooks the combination of these factors, especially within the context of developing economies. Using a sample of 302 companies delisted between 2010 and 2023 and 302 as a control group, we analyzed 72 variables through a multivariate panel probit regression model. Our findings reveal that delisting decisions are driven by a complex interplay of financial health, governance practices, and macroeconomic conditions. Financial health, including liquidity and market valuation, is crucial in mitigating delisting risk. Non-financial factors, such as corporate governance and shareholder composition, further reduce the likelihood of delisting. Macroeconomic conditions, including inflation and interest rates, introduce significant external pressures. This study is especially relevant in developing economies like South Africa, where economic volatility adds risks for listed companies. The results provide insights for companies, investors, regulators, and policymakers to ensure a stable and robust stock market and financial system and identify early warning signals for delisting. Full article

Integrated thinking and connectivity have recently attracted particular attention in sustainability reporting. A firm’s reporting on its Environmental, Social, and Governance (ESG) practices should be connected to the other business functions to optimize the ESG information provided through integrated reports. Academic research on the connectivity between ESG information and other business functions is limited. Hence, the main aim of this study is to analyze and characterize the reporting connectivity between the Sustainable Development Goals (SDGs) and other business functions of South African retail banks. This is done using a thematic content analysis of the integrated reports of each bank in the sample from 2016 to 2023. The sample consists of the top five retail banks in South Africa that are listed on the Johannesburg Stock Exchange (JSE). Specifically, the researchers determine the number of occurrences where the SDGs are linked to other business functions through an iterative process. Furthermore, several Analysis of Variance (ANOVA) models are implemented to identify which content elements have the strongest connectivity to the SDGs as well as to identify which elements have the strongest linkage to the various content elements. The results show that SDGs are primarily linked to stakeholders, the business model, and performance. Furthermore, it was found that this sample of South African banks most prominently links these business functions to SDG 8, which aligns with the banks’ purpose of furthering economic development. Full article

The exponential growth in popularity of ETFs over the last three decades has solidified ETFs as an essential component of many investors’ portfolios. Investor sentiment is one of the factors that influence market returns of ETFs during times of market volatility. This article highlights the gap in the literature by examining the role sentiment plays in ETF volatility and providing a more comprehensive understanding of how sentiment interacts with market conditions to affect ETF pricing in the South African context. This article aims to determine the effect of investor sentiment on JSE-listed ETF returns under changing market conditions. The study followed a quantitative methodology using monthly closing prices of seven JSE ETFs and an investor sentiment index. A sample period from October 2008 to December 2023 was used. For a more complex understanding of how sentiment evolved and influenced market regimes, the Markov regime-switching model was integrated with Principal Component Analysis. The results found that investor sentiment had a significant impact on most of the ETFs in both the bull and bear regimes. The bull market was more dominant than the bear market across the ETF returns. Therefore, investor sentiment affected the returns of JSE ETFs. Identifying the effect of investor sentiment on ETFs results in ETF portfolios being less affected by changing market conditions by using risk management techniques and diversifying across asset classes and investing methods. Full article

Sentiment analysis is a well-known task that has been used to analyse customer feedback reviews and media headlines to detect the sentimental personality or polarisation of a given text. With the growth of social media and other online platforms, like Twitter (now branded as X), Facebook, blogs, and others, it has been used in the investment community to monitor customer feedback, reviews, and news headlines about financial institutions’ products and services to ensure business success and prioritise aspects of customer relationship management. Supervised learning algorithms have been popularly employed for this task, but the performance of these models has been compromised due to the brevity of the content and the presence of idiomatic expressions, sound imitations, and abbreviations. Additionally, the pre-training of a larger language model (PTLM) struggles to capture bidirectional contextual knowledge learnt through word dependency because the sentence-level representation fails to take broad features into account. We develop a novel structure called language feature extraction and adaptation for reviews (LFEAR), an advanced natural language model that amalgamates retrieval-augmented generation (RAG) with a conversation format for an auto-regressive fine-tuning model (ARFT). This helps to overcome the limitations of lexicon-based tools and the reliance on pre-defined sentiment lexicons, which may not fully capture the range of sentiments in natural language and address questions on various topics and tasks. LFEAR is fine-tuned on Hellopeter reviews that incorporate industry-specific contextual information retrieval to show resilience and flexibility for various tasks, including analysing sentiments in reviews of restaurants, movies, politics, and financial products. The proposed model achieved an average precision score of 98.45%, answer correctness of 93.85%, and context precision of 97.69% based on Retrieval-Augmented Generation Assessment (RAGAS) metrics. The LFEAR model is effective in conducting sentiment analysis across various domains due to its adaptability and scalable inference mechanism. It considers unique language characteristics and patterns in specific domains to ensure accurate sentiment annotation. This is particularly beneficial for individuals in the financial sector, such as investors and institutions, including those listed on the Johannesburg Stock Exchange (JSE), which is the primary stock exchange in South Africa and plays a significant role in the country’s financial market. Future initiatives will focus on incorporating a wider range of data sources and improving the system’s ability to express nuanced sentiments effectively, enhancing its usefulness in diverse real-world scenarios. Full article

An assessment was made halfway into the sustainable development goals (SDGs) agenda period, and the findings indicated a slower than anticipated pace towards the implementation of the SDGs agenda. One of the possible causes of the slower pace is a lack of strong governance mechanisms such as gender diversity, sustainability committees, and board sustainability experience in institutions. The study sought to investigate the influence of board gender diversity on SDGs disclosure amongst the top 15 JSE-listed mining companies in light of their contribution towards the attainment of this global agenda. Mining in South Africa affects about nine percent of the country’s population. The study was anchored on the agency and the stakeholder theories. This is quantitative research which employed a keyword search to measure SDGs disclosure in the annual integrated reports for the sampled companies from 2019 to 2023. The study hypothesised that there is a significant positive relationship between a female-dominated board and SDGs disclosure in the sampled companies. Descriptive statistics, correlation analysis, as well as regression analysis were employed. The results established a lack of significant evidence of a positive or negative relationship between gender diversity and SDGs disclosure, a significant positive relationship between board size and SDGs disclosure, and no relationship between board independence and SDGs disclosure in the sampled mining companies. It was concluded that board gender diversity in corporate boards in the top 15 JSE-listed mining companies has no impact on the SDGs disclosure. The study recommends including more moderating factors and conducting more empirical studies towards the attainment of conclusive results in this space. Full article

The purpose of this study was to examine the key determinants of corporate governance in selected financial institutions. Using South African financial institutions as a unit of analysis, namely insurance companies and banks, the study employed a panel generalised method of moments (GMM) model using a data set for the period from 2007 to 2020, to assess key determinants of corporate governance proxies identified for the study. The study sampled 21 South African financial institutions composed of Johannesburg Securities Exchange (JSE) listed and unlisted banks and insurance companies. To measure corporate governance, the study developed a composite index employing the principal components analysis (PCA) method. The findings revealed a positive and significant association between the corporate governance index and its lagged variables. Furthermore, a significant and positive link was found between the efficiency ratio and corporate governance index and capital adequacy ratio (CAR); corporate governance index and firm size; corporate governance index and leverage ratio (LEV); and corporate governance index and return on assets (ROA). However, a negative and significant correlation was found between financial stability and the corporate governance index. The link between return on equity (ROE) and corporate governance was insignificant. A small cohort of financial institutions was excluded because it was challenging to obtain complete annual reports to extract the required data. The study was limited to only five corporate governance measures, namely board diversity, board size, board composition (independent non-executive directors and non-executive directors), and board remuneration. The findings are anticipated to persuade developing countries to pay special attention to how corporate governance is measured. Full article