Faculty of Management Sciences
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Item Trade credit and bank credit as alternative governance structures in South Africa : evidence from banking sector development(Business Perspectives, 2017-10-09) Mugova, ShameFinancial sector development is an influential force that outlines the financing and governance of firms in emerging economies. Suppliers and bankers represent alternative governance structures to a firm because of their trade credit and loan requirements, respectively. The continuous monitoring of investment by banks and suppliers impacts on corporate disclosure and practices. The study compares a sample of Johannesburg Stock Exchange (JSE) firms listed on the Socially Responsible Investment (SRI) index which measures corporate governance and those not listed on the index. A Generalized Least Squares (GLS) random effect regression of banking sector development and trade credit of firms listed on the JSE SRI and non-SRI listed firms was done to ascertain whether trade credit gives firms a preferred governance system and structure. The findings affirm that good corporate governance practices improve access to bank loans for working capital financing and good governance practices do not consequently result in more bank loan as a preferred governance structure for working capital financing compared to use of trade credit.Item Corporate governance and credit financing in a developing economy(Virtus Interpress, 2017) Mugova, Shame; Sachs, Paul R.Emerging markets have common weaknesses in their financial market development. Financial development is one institutional force that shapes financing and governance of firms in emerging markets. Debt and equity are alternative governance instruments. Trade credit is part of debt and therefore should be treated as such in corporate governance. We used a fixed effect regression of financial sector development and trade credit of firms listed on the Johannesburg Stock Exchange to ascertain the relationship of financial sector development and trade credit. We also analyzed the Socially Responsible Index (SRI) which measures corporate governance. We find that good corporate governance practices do not result in substituting of trade credit, despite its high implicit costs, with bank loans for working capital financing.Item Financial sector development & firm growth in BRICS countries(Virtus Interpress, 2017) Mugova, ShameThe development of an economy’s financial sector facilitates improved access to capital. This study focuses on firm growth in terms of how much assets it controls and BRICS is chosen as the empirical medium of investigation. The impact financial sector development on firm growth amongst 3353 listed firms in BRICS countries is investigated using a GMM estimation technique. Firm’s investment in assets increases the organizational resources and productive capacity needed to achieve growth in the market. Financial sector development improves access to capital and firms with higher access to external finance pursue growth opportunities using debt. Financial sector development helps firms to adjust their capital structures quickly thereby minimizing the costs of staying off target. The speed of adjustment of firms towards their target capital structure facilitates financing of firm growth. The study found that listed firms in Brazil, Russia India, China and South Africa have a target total liabilities-to-total assets ratio and financial sector development helps firms to partially adjust towards target levels and pursue growth opportunities.Item Financial sector development and trade credit : a case of BRICS countries(2018) Mugova, Shame; Kwenda, FaraiWhile there is a growing body of literature on trade credit’s role in short-term financing, few studies have examined the relationship between trade credit use and financial sector development. This study investigates the hypothesis that firms in countries with poorly developed financial sectors rely on trade credit. The main objective is to critically examine the relationship between trade credit and financial sector development. The study uses listed firms in emerging economies and evaluates the causality of the relationship using panel data econometric techniques. A quantitative approach was used to explain the underlying relationship between trade credit and financial sector development in Brazil, Russia, India, China and South Africa (BRICS). The research setting is on emerging economies that are committed to developing their financial sectors. The study investigates the relationship between financial sector development and trade credit use amongst listed firms in BRICS countries as well as the extent of trade credit usage in these countries. It also explores the relationship between banking sector development and trade credit use by firms. The study finds that financial sector development does not influence trade credit use by firms in BRICS countries and that current levels of trade credit cannot be explained by past values of such development. Trade credit is not Granger caused by financial sector development and financial sector development does not assist in predicting trade credit use by firms. On the contrary, trade credit Granger causes financial sector development in BRICS countries. Current levels of financial sector development can be explained by past values of trade credit use by firms. Trade credit Granger causes financial sector development and firms’ use of trade credit does help in predicting financial sector development. Finally, the study confirms the role of trade credit as an important source of finance for working capital within the trade credit-financial sector development discourse whilst also demonstrating the significance of banking sector development. An analysis of historical trade credit use in an economy helps to predict the level of financial sector development, which informs firms whether or not they need to increase bank loans or trade credit as sources of working capital. In light of these findings, it is recommended that firms in BRICS countries embrace efficient trade credit management and adjust their policies in response to financial sector development in order to minimize their borrowing costs. Trade credit precedes banking sector development; therefore, it is important to the growth of firms before they gain access to bank credit or the banking sector itself develops. Bank managers and finance executives should study and analyse trade credit use patterns by firms because trade payables compete with bank loans. The implications of trade credit use for financial sector development and business-to-business relationships imply that this is an important area which should be regulated to reduce the probability of corporate default. Financial and international banking regulatory agencies should also study and analyse trade credit use as it has a causative and predictive effect on financial sector development.Item Corporate governance, structure and accountability as affected by national government infrastructure in developing countries(Virtus Interpress, 2016-01) Mugova, Shame; Sachs, Paul R.Businesses in developing countries face different challenges than those in economically developed countries. Markets and supply chains are less well-established. Dissemination of information is uneven. Because governmental infrastructure has limited ability to support business operations,, businesses take on responsibilities that elsewhere are handled by a central government. This study revie3ws key elements of corporate governance. The study then reviews the banking and manufacturing sectors in Zimbabwe with attention to the presence or absence of financial infrastructure, legal infrastructure, market challenges, supply chain and government involvement to support corporate governance structures and systems. Recommendations for policy and practice changes are offered. The present analysis of Zimbabwe can guide research on and policy recommendations for governance in other developing countries.