Faculty of Accounting and Informatics
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Item Evaluating the influence of leverage and liquidity on the financial performance of general insurance companies in Sub-Saharan Africa(LLC CPC Business Perspectives, 2022-08-05) Msomi, Thabiso SthembisoThe factors of the insurance industry’s business performance are of concern to a variety of participants in any economy, such as the government, politicians, policyholders, and speculators. There has been very little research on this issue in Sub-Saharan Africa, with the majority focusing on specific factors that influence the performance of insurance businesses. The purpose of this paper was to evaluate the influence of leverage and liquidity on financial performance of general insurance companies in Sub-Saharan Africa. The study used descriptive correlational techniques to obtain panel data across 113 general insurers operating in Sub-Saharan Africa as of December 31, 2019, for 11 years (2008–2019). The pooled OLS, fixed effects and random effects models were estimated with the financial performance measures (proxied by ROA) as the dependent variables where the Hausman test was employed to test the hypothesis. The study found that there is a negative negligible link between leverage and financial performance, whereas there is a positive association between liquidity and financial performance. The study suggested that proper liquidity management is critical for insurance businesses to enhance a company’s value as well as financial success. The focus should be on establishing a proper asset-liability mix, in which a company’s total liabilities do not exceed its total assets. Furthermore, organizations require cash flow policy recommendations to optimize profit potential while limiting liquidity risk in the financial statement.Item Macroeconomic and firm-specific determinants of financial performance : evidence from non-life insurance companies in Africa(Informa UK Limited, 2023-12-31) Msomi, Thabiso SthembisoThis study aimed to examine the macroeconomic and firm-specific determinants of financial performance using 121 listed non-life insurance companies from 48 African countries for the period 2008–2019. Panel data of 1452 observations were examined using both ordinary least squares and two-step System Generalised Method of Moments estimators. The findings of this study show that lagged return on assets, equity capital, operational efficiency and leverage, investment capability and gross domestic product are the statistically significant determinants of financial performance in African non-life insurance companies even though equity capital, operational efficiency and leverage are inversely significant. It is concluded that insurance industries, policymakers, government and investors should take into consideration these significant factors in taking decision and improving their performance. Also, it is recommended that the capital structures of the sector should be restructured to maintain a favourable balance in the equity and debt of the companies. Also, mechanisms such as automated systems that can reduce operational cost should be adopted such that financial performance can be enhanced.Item Environmental, social and governance and financial performance nexus in South African listed firms(AOSIS, 2024-01-01) Matemane, Reon; Msomi, Thabiso Sthembiso; Ngundu, MarvellousBackground: Environmental, social and governance (ESG) factors have become topical in recent years because of climate change existential threat to humanity. There is, however, a limited understanding of how the firm’s ESG efforts affect firm outcomes. Aim: The aim of this study was to investigate the relationship between firm’s ESG indicators and the financial performance. Setting: The sample is drawn from Johannesburg Stock Exchange (JSE) listed companies based on data availability. South Africa is not only plagued by social ills and governance failures, but it is also one of the world’s largest emitters of greenhouse gases, making it an ideal laboratory for studying the ESG and firm performance nexus. Method: We utilized a dataset spanning the years 2012–2022, covering 67 JSE-listed firms. These panel data were analyzed using the two-step system generalised method of moments (GMM). Results: We found that the disaggregated ESG indexes have a positive, albeit insignificant impact on the financial performance. These findings hold even when financial and non-financial firms are examined separately. Conclusion: Policymakers, including standard setters and regulators, should encourage firms to be sincere on ESG efforts and avoid greenwashing. Contribution: The study employs a relatively robust estimation technique (two-step system GMM) over a relatively long period (2012–2012). Furthermore, the sectoral analysis of financial and non-financial firms adds to the body of literature and policy development.Item The role of environmental disclosures in enhancing firm value : evidence from listed manufacturing firms(International Institute for Science, Technology and Education, 2023-01) Mgilane, Nolwando L.; Maama, Haruna; Marimuthu, FerinaThe traditional approach to financial performance reporting has experienced a significant shift as stakeholders increasingly demand greater transparency regarding firms' environmental and social impact. This has elevated the importance of environmental reporting due to its potential influence on firms' financial strength. This study investigates the relationship between environmental reporting and the value of manufacturing firms listed on the Johannesburg Stock Exchange (JSE) in South Africa. The study conducted a content analysis on 250 annual integrated reports from 50 manufacturing firms listed on the JSE between 2016 and 2020 and utilized a multiple regression analysis. The findings revealed a negative relationship between environmental reporting and firm value, suggesting that adopting environmental reporting may involve additional financial resources, which are perceived as an outflow of funds in an economic context. Consequently, this study recommends that manufacturing companies analyse their stakeholders' characteristics and information needs to present relevant environmental reporting in their annual integrated reports. By doing so, companies can enhance their legitimacy with stakeholders, maximise shareholder value, and ultimately increase firm value. This research contributes to the existing literature on environmental, social, and financial reporting, particularly in South Africa, by focusing specifically on manufacturing firms listed on the JSE.Item The effect of late payments on suppliers' financial performance : a case study of a government department's supply chain in the Eastern Cape(2023-08-17) Madlavu, Phindiwe; Olarewaju, Odunayo MagretUsing a case study of the government department supply chain in the Eastern Cape, the proposed study examines the effects of late payments on suppliers' financial performance. It does this by giving foundation information, such as the nearness of the issue to be investigated, the goals for performing the research, the research objectives, and the questions to be replied to through the research and the research methodology. The research goes into detail, discussing the appropriate framework, the conceptual framework of SCM within the public sector in South Africa, noteworthiness and inspiration to research, and the research's confinements. It wraps up by laying out the research's system. The research used conceptual and theoretical reviews to understand the nature of the problem. Qualitative and quantitative approaches were used to determine how a late payment affects a supplier's financial performance. The data were analyzed using the latest SPSS software package. Convenience sampling was used. The population is 362 staff and the target sample consisted of 120 finance management and supply chain management department members and 70 chosen suppliers in the Eastern Cape Province. The study targeted a sample size of 190. The findings show that SCM has been fully deployed in all government agencies and that the SCM approach has been used to develop technologies, but the lack of swift payment is hindering their effectiveness. The study concluded that redesigning and integrating departmental procurement and finance training courses across departments to ensure strong SCM principles are implemented should be enforced. Moreover, there should be proper monitoring and evaluation of all tendering contracts because it affects service delivery. A well monitored contract process will ensure that the service providers complete their contracts as and when due. Also, it was concluded that most concerns in facilitating invoices are delays in submitting invoices by suppliers and submitting incomplete banking details by suppliers. Likewise, it is concluded from the findings of the study that there were contradictions in the information provided by suppliers at other times. Thus, the study recommends innovative policies that will enhance swift payments through automated invoicing and painstaking monitoring of processes for the supply chain department.Item Impact of environmental disclosure on financial health of manufacturing firms(Cosmos S.A., 2023) Marimuthu, Ferina; Mgilane, Nolwando; Maama, HarunaEnvironmental reporting can help firms stay in compliance with environmental regulations and manage environmental risks. By proactively addressing and disclosing their environmental impact, manufacturing firms can mitigate potential legal and regulatory penalties, fines, and reputation damage, thereby safeguarding their financial performance. In addition to the latter perspective, cost savings and operational efficiency, enhanced reputation and stakeholder engagement, as well as access to capital and investment opportunities, are critical factors to ensure that firms disclose information about their environmental performance, including its impact on the environment, sustainability initiatives, and environmental risks and opportunities to ensure that they maximise their financial performance. Hence, the aim of this study is to explore the relationship between environmental reporting and financial performance of South African listed manufacturing firms. A multiple regression analysis was adopted to achieve the aim by testing the relationship between the variables amongst a sample of 50 manufacturing firms listed on the Johannesburg Stock Exchange (JSE). A content analysis was utilized to attain environmental reporting information themes from the integrated annual reports retrieved from the JSE for the period 2016 to 2020. The results indicate a negative association between environmental reporting responsibility and financial performance, measured by return on equity (ROE) when the components of environmental reporting are tested individually. However, when these components namely: environmental reporting, social reporting and environmental degradation are combined the findings reveal a positive and statistically significant relationship. These results imply that the adoption of environmental reporting, specifically an increase on the quality of environmental reporting results in an increase in the manufacturing firm performance.Item Perceptions of non-government organisations managers about international financial reporting standards in the NGOs sector : a case study of a large NGO in Durban, South Africa(PT Keberlanjutan Strategis Indonesia, 2023) Mvunabandi, Jean Damascene; Mbonigaba, JosueThe role of international financial reporting standards (IFRS) in the growth of organisations has expanded significantly in recent literature. Non-governmental organisations (NGOs) are crucial in global affairs and have different operating contexts, but it is unclear how their use of IFRS is of sufficient quality to satisfy various stakeholders' interests. On this question, this article investigated the managers' perceptions of IFRS practices and quality in a large NGO in Durban, South Africa. A qualitative approach was employed, and data was collected through semi-structured interviews with 24 purposively selected participants. The interviews were recorded and later transcribed. Robustness analysis was performed using conventional thematic content analysis. Evidence from this study showed that despite adopting IFRS accounting and financial procedures, the managers of the selected NGO found it difficult to have quality financial statements due to IFRS for SMEs failing to fit NGOs' operating context. This article established NGOs managers' perceptions of the role of IFRS in managing diverse NGOs stakeholders' interests, provided recommendations applicable to similar NGOs globally and contributed to the scholarly debates for policymakers and practitioners on using IFRS for SMEs in NGOs. This study has also provided a very robust plan for future researchers.Item Investigating the effects of financial management practices on financial performance of a State-Owned Enterprise in Johannesburg(2022-08-11) Ntuli, Sizwe Perfect Ayanda; Nzuza, Zwelihle WisemanThe effectiveness of financial management practices in the state-owned enterprises (SOEs) is becoming extremely indispensable and frugal in South Africa. However, the dynamics of the effectiveness of financial management practices on the SOEs is not much reconnoitred or not in existence in the collected works of academics with previous studies largely paid attention to the private sector whereas there is also a monumental necessity for the SOEs to be financially viable. Therefore, this study insightfully examined the employees’ perceptions on the effects of financial management practices (independent variable) on improving financial performance (dependent variable) in a selected South African SOE. Quantitative research design was employed in the study, and it was cross-sectional in nature. The survey questionnaire was utilised as a primary data collection tool. The study adopted a convenience sampling method which resulted in a sample size of 69 respondents at the response rate of 74%. The statistical results were determined using Statistical Package for Social Sciences (SPSS) (version 27®). The study revealed a positive relationship when measuring the independent variables against the financial performance. The study recommended a resilient application of cash management practices in the form of determining target cash balances on a regular basis as a working capital management practice to realise enhanced financial performance. The study further recommends that as the firm considers expanding the investments to real estates, that practice should be aimed at firm value maximisation. It is further recommended that future similar studies consider broadening the research scope by including all the operational divisions of an SOE from different regions throughout South Africa.Item The impact of environmental costs on financial performance : an explorative analysis of two plastic companies(LLC “Consulting Publishing Company “Business Perspectives", 2023-03) Aliamutu, Kansilembo Freddy; Bhana, Anrusha; Suknunan, SachinThere is little research on the impact of environmental costs on plastic manufacturing companies’ financial performance and sustainability. This paper aims to explore the relationship between environmental costs and financial performance of two large national plastic manufacturing companies, namely Bowler Metcalf Limited (BML) and Nampak Ltd, between 2018 and 2019 since research allows for five year old information. Further, the study used pre-Covid-19 data to conceptualize. It adopted a qualitative method of inquiry using content analysis to analyze the financial statements and reports of the two companies (secondary data analysis) available in the public domain. The interpretative analysis further supported the analysis and interpretation of the two variables of environmental costs and financial performance. The results showed a positive relationship between environmental costs and profits in the financial statements of these two companies during 2018 and 2019. BML had a decrease in plastic penalties from R 23.171 million in 2018 to R 14.596 million in 2019, which supported a reduction in spending on legal and constructive obligation items. Nampak also decreased stakeholders’ equity from R 10,140.3 million in 2018 to R 8,932.33 million in 2019, which meant that the stakeholders’ equity funds were reduced, possibly due to reduced spending on environmental costs during that period. It can be concluded and established that when these two plastic companies spend more on environmental costs, this positively affects overall financial performance and improves financial sustainability. It is recommended to allocate more resources/funding to support environmental costs to increase the profitability of the two plastic manufacturing companies.Item Financial accounting as a tool to enhance non-government organisations’ performance : a case study of a large NGO in Durban, South Africa(EconJournals, 2022) Mvunabandi, Jean Damascene; Lathleiff, Charmaine; Muzindutsi, Paul-FrancoisNumerous non-governmental organisations (NGOs) in South Africa and elsewhere do not have standardised financial accounting practices to follow in preparing their financial statements and it is not clear whether the International Financial Reporting Standards (IFRS) for Small and Medium-sized Entities (SMEs) can be used to enhance NGOs performance (Kaya et al., 2015). This article explored the applicability of financial accounting practices as a relevant tool to enhance NGO performance with particular reference to a large NGO in Durban, South Africa. A qualitative approach was employed and data was collected through the use of semi-structured interviews and conventional thematic and document analysis. Evidence from this study showed that despite adopting accounting and financial policy and procedures, the selected NGO finds it difficult to maximise its financial performance due to failure to fully comply with IFRS for SMEs in South Africa. This article provides necessary recommendations applicable to other similar NGOs globally.