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Research Publications (Accounting and Informatics)

Permanent URI for this collectionhttp://ir-dev.dut.ac.za/handle/10321/212

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Subject: search.filters.subject.Capital structure

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    Do South African state-owned entities follow the pecking order theory of capital structure?
    (LLC CPC Business Perspectives, 2021-05-21) Marimuthu, Ferina; Caroline Singh, Stephanie
    In corporate finance, the pecking-order theory suggests that companies adhere to a particular financing hierarchy, with internal funding taking preference over external funding, and debt financing taking preference over equity. This paper examines whether South African state-owned entities prioritize their financing sources as predicted by the pecking-order theory. A financing deficit variable comprising various cash flow-based components was used to test the theory. A panel regression model was employed using panel data estimators. Using a cross-section sample of 33 state-owned entities from 1995 to 2018, the study finds no evidence that South African state-owned entities follow a pecking order to finance investment projects. The pecking order theory proposition that costs of adverse selection are dominant for lower levels of leverage provides a reason for the financing deficit coefficient not being close to unity and hence an indication that the SOEs in South Africa do not follow the pecking order behavior in their financing decisions, an indication that South African capital market is still developing.
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    Interplay between capital structure choice and survival and growth of small, medium, and micro enterprises : a South African context
    (LLC CPC Business Perspectives, 2019-11-26) Nyide, Celani John; Zunckel, Sharon
    It is essential for small, medium, and micro enterprises (SMMEs) to become established, be sustainable and grow. These firms play a vital role in the economy of both developed and developing countries. Empirical studies have acknowledged the contribution of SMMEs to the economy, as well as to the gross domestic product. However, the failure rate of these firms has also been emphasized in the same studies. SMME survival is critical for economic growth, which is measured by increases in profits. Capital structure decisions are significant to the survival and growth of these entities. This study was conducted to examine the interplay between capital structure and SMMEs` survival and growth in a developing economy. A sample size of 103 SMMEs was chosen on a non-probability basis using convenience sampling within the eThekwini area, KwaZulu-Natal, South Africa. The statistical tool used for analysis in this study was the Partial Least Squares Structural Equation Modelling (PLS-SEM) 5.0 software. Capital structure was found to have a significant influence on the growth and survival of small, medium, and micro enterprises. The study concludes that utilizing retained earnings, personal savings, trade credit and funds from friends and family has a significant influence on the growth and survival of the firm. Debt and external equity financing, on the other hand, have an insignificant influence on the growth the firm.
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    Capital structure of small, medium and micro enterprises : major factors for a developing economy
    (LLC CPC Business Perspectives, 2019-05-06) Zunckel, Sharon; Nyide, Celani John
    Managing capital structure is an imperative decision made by all firms. The manner in which financing is organized is a strategic financial decision and managers must settle on the amount of debt in relation to equity that it requires to maintain. Despite many empirical studies investigating the choice of capital structure for large corporates, minimal research has been conducted on capital structure decisions in small, medium, and micro enterprises (SMMEs). This study identifies major factors influencing the capital structure of SMMEs in a developing economy and enlightens owners/managers on the importance thereof. This investigation used a quantitative research approach, which was cross-sectional. A convenience sampling method was adopted, and data were collected from 136 respondents, only confined to the retail and whole sector, which is the second largest sector in KwaZulu-Natal, South Africa. The partial least squares structural equation modelling was utilized to determine the statistical results. It was discovered that managerial factors such as individual goals and financing preference of the owner/manager, network ties, attitude to debt, maintaining control and asymmetric information; and firm-level factors such as size of the firm, profitability and firm age are major factors that influence the capital structure of SMMEs. Therefore, capital structure decisions are made motivated by the attitudes of the owners/managers.