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Subject: search.filters.subject.Capital structure

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Now showing 1 - 5 of 5
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    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 Wiseman
    The 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.
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    The effects of capital structure on the operational efficiency of Small and Medium-Sized manufacturing enterprises (SMSME) in Pietermaritzburg, South Africa
    (2021-12-16) Nxumalo, Nomfundo Kuhlekonke Minenhle; Olarewaju, Odunayo Magret; Ngiba, Brian Thulane
    The study examined the effects of capital structure on the operational efficiency of SMSME (SMSME) in Pietermaritzburg, Kwa-Zulu Natal, South Africa (SA). The objective of the research work was to evaluate the difficulties that SMSME in PMB face in accessing financial aid from financial institutions. Furthermore, to examine the factors that influence the operational efficiency of SMSME in PMB. Finally, to determine the impacts of capital structure on the operational efficiency of SMSME in PMB. The study was cross-sectional and utilized a quantitative research method. The primary data gathering instrument was a survey questionnaire. The researcher used an adjusted sampling procedure that yielded a sample size of 107, but the researcher decided to employ the whole target population of 148, which resulted in 141 responses. The information was gathered by survey questionnaires and analyzed with the Statistical Package for the Social Sciences (SPSS). According to the findings of this research work, most manufacturing SMEs could not access funding because of the information gap. Some of the most notable findings suggested that SMEs lack the requirements to access the loan. Internal sources of funding are preferred by most SMEs since they are easier to get and less expensive. The findings show that the capital structure of the organization is influenced by the business size, its age, its profitability, and its assets. The longer a business has been around and the larger it is, the more it indicates that it can withstand difficult economic times. Instead of making decisions on capital structure based on broad overviews, the study advised that businesses should examine closely and compare the cost of capital to the value that may be gained from it when deciding on the capital structure composition. This will assist managers in ensuring a profit at the end of the day. This finding contradicts the findings of most research done in developed countries, which suggest that capital structure and the performance of a firm (operational efficiency) possess a positive relationship. The findings of this study reveal that, even though some government funding and support groups have been there for a long time, small firms are still uninformed of them, and those that are aware are underutilizing them. The findings of the research work supported the pecking order theory which suggests that a firm should utilize internal sources to keep away from asymmetric information costs. However, if the sources internally are not sufficient to finance the operations of the business, they can look at the external sources to finance.
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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.