Chimwemwe Chipeta

Day-of-the-week effect: Evidence from the nine economic sectors of the JSE

ABSTRACT This study is the first in South Africa to test directly for the day-of-the-week effect on skewness and kurtosis on the nine listed economic stock market sector indices of the JSE. The empirical results of this study show no evidence of the day-of-the-week effect on skewness and kurtosis for eight of the nine JSE stock market sectors. However, the Monday effect was detected for the basic materials sector only. The study also finds the JSE to be weak-form efficient.

What Drives Financial Innovations in Kenya’s Commercial Banks? An Empirical Study on Firm and Macro-Level Drivers of Branchless Banking

ABSTRACT This paper examines the firm- and macro-level drivers of financial innovations in Kenya’s commercial banks. We focus on branchless banking innovations, namely: mobile banking, agency banking, internet banking and automated teller machines. These financial innovations represent a departure from traditional branch based banking. We conduct an empirical analysis of the four financial innovations using Koyck distributed lag models, estimated using dynamic panel estimation with System Generalized Method of Moments. We use 10-year panel data from 42 out of 43 commercial banks in Kenya covering the years 2004–2013. We provide empirical evidence that at the firm level, branchless banking is driven by firm size, transaction cost, agency costs, technological developments at the firm level and firm constraints. In addition, at the macro level, regulation, technological developments at the macro level, incompleteness in financial markets and globalization are important drivers of branchless banking.

Firm heterogeneity, macroeconomic conditions and capital structure adjustment speeds : evidence from the JSE

ABSTRACT This paper examines the effects of firm heterogeneity and macroeconomic conditions on the adjustment speed towards the target level of capital structure. The DPF estimator is used to carry out the analysis for a panel of 191 non-financial firms listed on the JSE for the period 2000 to 2010. Consistent with prior studies, the pace of adjustment towards the optimal capital structure is a function of firm specific characteristics and macroeconomic conditions. There is evidence to suggest that firms target the total and long term leverage, and not the short term leverage ratio. Firm level characteristics are shown to have differing effects on the adjustments speeds, and macroeconomic conditions play a significant role in influencing variations in capital structure adjustment speeds.

Structural breaks in the parameter estimates of the determinants of capital structure: Some evidence from the JSE

Purpose - This paper aims to test the effects of financial reforms on the structural stability of the parameter estimates in the determinants of capital structure. Design/methodology/approach - A panel of 100 non-financial companies listed on the Johannesburg Stock Exchange is constructed, and a panel least squares estimation technique is used to test for lagged, current and leading structural breaks in the firm specific determinants of leverage. Findings - The results show that structural reforms have a significant role in influencing the empirical relationship between leverage and its determinants. Specifically, the lifting of international sanctions and stock market liberalisation have a significant impact on the stability of the profitability, growth and tax rate variables for the book and market values of the debt to equity ratio. Furthermore, when the total and short term debt ratios are considered, only stock market liberalisation appears to have a significant influence on the stability of the profitability parameter. Originality/value - This paper adds to the existing body of literature on capital structure by documenting the extent of structural breaks in the parameter estimates of the relationship between leverage and firm specific determinants of capital structure for listed non-financial firms in South Africa.

The asymmetric effects of financing deficits and surpluses on the pecking order theory in sub-Saharan Africa

ABSTRACT This paper is the first to examine the asymmetric effects of financing deficits and surpluses on the pecking order financing strategies in sub-Saharan Africa. Panel data estimation techniques are carried out on a sample of 564 non-financial firms for the years 2006 to 2014. Overall, the individual country analysis reveals that equity tracks the financing deficit better than debt for firms with financing deficits. However, the categorical analysis shows that firms operating in the weakest legal environments appear to follow pecking order financing strategies. A steady decline in the magnitude of the pecking order coefficient is observed as we progress from the weakest to the strongest legal systems. In addition, significant differences in the pecking order behaviour for firms with surpluses and deficits are observed in the upper and lower categories of banking and stock market development.

In search of conclusive evidence on the trade-off and pecking order theories of capital structure: Evidence from the Johannesburg Stock Exchange

ABSTRACT This paper tests the validity of the trade-off and pecking order theories of capital structure for non-financial firms listed on the Johannesburg Stock Exchange. Firstly, we find that the pecking order model is superior than the partial adjustment regressions at rejecting random financing behaviour. Secondly, tests on real data show that partial adjustment regressions confirm (reject) target adjustment behaviour for off (on) target firms. However, when falsely generated random financing gaps are used, the GMM model records a higher error rate compared to the Censored Tobit Regressions. Lastly, we propose alternative tests of both theories, and show that the pecking order theory works well, except under conditions where firms with reported financial deficits are at the bottom of the pecking order.

Impact of financial liberalisation on capital structure: Evidence from the Johannesburg Securities Exchange

This study tested the impact of financial liberalisation on a panel of non financial firms listed on the Johannesburg Stock Exchange. Using fixed, random effects and instrumental variable models, it was found that the removal of international sanctions and stock market liberalisation have a significant negative impact on most measures firm leverage. Capital account liberalisation has a direct and significant impact on firm leverage and the impact of domestic financial sector liberalisation on capital structure is weak. Firms increase their debt maturity structure following stock market liberalisation. The effects of financial liberalisation are more pronounced on larger firms.