Jan Walters Kruger

A resource allocation model to support efficient air quality management in South Africa

Research into management interventions that create the required enabling environment for growth and development in South Africa are both timely and appropriate. In the research reported in this paper, the authors investigated the level of efficiency of the Air Quality Units within the three spheres of government viz. National, Provincial, and Local Departments of Environmental Management in South Africa, with the view to develop a resource allocation model. The inputs to the model were calculated from the actual man-hours spent on twelve selected activities relating to project management, knowledge management and change management. The outputs assessed were aligned to the requirements of the mandates of these Departments. Several models were explored using multiple regressions and stepwise techniques. The model that best explained the efficiency of the organisations from the input data was selected. Logistic regression analysis was identified as the most appropriate tool. This model is used to predict the required resources per Air Quality Unit in the different spheres of government in an attempt at supporting and empowering the air quality regime to achieve improved output efficiency.

Risk, Book to Market and Size Effects in the South African Stock Market

Anecdotal evidence suggests that investment in high risk shares will yield superior returns. In this study companies listed on the Johannesburg Stock Exchange were reviewed over a ten year period. The return of each company, over the first five year period, was used to calculate a standard deviation of return and a beta value for each company. These values represent the risk associated with the shares. The correlation coefficient between the risk and the return over the following five years was calculated. (r = -0.1296, not significant at a 5% level of significance). The study also looks at firm size and the book to market ratio, to determine if those factors are predictors of returns. A significant negative relationship was found between Firm Size and Return (r = -0.1995, which is significant at a 5% level). The Return of small firms significantly outperform large firms. It is recommended that investors should use firm size when making investment decisions.

An Improvement on an Interest Rate Commission Agent Banking System Model (AIRCABS)

This paper sought to test the effect of investor loan funding, credit risk and liquidity crunch, on AIRCABS sustainability and profitability. The result found that AIRCABS was not affected by credit risk and liquidity crunch and the increase of investor loan funding increased AIRCABS sustainability and profitability. Calculating discrete market deposit interest incentive into account of depositor who latter shifted to an investor position to get proportionate credit price instead of deposit interest rate on the fund already invested by the bank which latter shifted to an agent position found increasing stability of money deposited by depositors.

Developing a Model for Determining Corporate Performance after Bank Acquisition

This is a panel study designed to develop a model to determine bank performance after acquisition. Data Envelopment Analysis (DEA) using Value Added Approach which adopted both Constant Returns to Scale (CRS) and Variable Returns to Scale (VRS) models was employed to determine efficiency scores of the banks. The study examined 62 banks from 30 countries acquired in 2006 and which had data with Fitch/IBCA/Bureau Van Dijk Bankscope database. The banks were divided into large and small groups. The study period was from 2007-2012. Results from the VRS model were used for further analyses. The Malmquist TFP was determined to identify key value drivers in the acquired banks. Five environmental variables namely Corruption Perception Index (CPI), Bank Industry Concentration (BIC), Total Assets, Gross Domestic Product (GDP) and Real Interest Rates were regressed on the efficiency scores using fractional regression models to determine their impact on efficiency scores. The “Spearman rho” correlation between efficiency scores and profitability ratios was established.

A Methodology to Test Viability of an Interest Rate Commission Agent Banking System (AIRCABS)

This research presents a stepwise description, explanation and prediction of dependent and independent variables in developing empirical methodology to test the viability of an interest rate commission agent banking system, a system where the bank acts as an agent for investors’ loan funding. The bank sets an agreement to administer the loan after disbursement and retains reasonable interest rate commission from the agreed investors’ loan funding credit price. Although no empirically tested bank intermediation model has been published, the researcher considered primary data from structured survey questionnaires from a sample population of 300 bank professionals and ten years financial statements published in the period from 1 July, 2006 to 30 June, 2016. One government bank and 16 private commercial banks in Ethiopia were included. To test the research hypothesis, canonical correlation and a multiple logistic regression statistical tools were considered. To analyse the survey questionnaires Cronbach Alpa was used.

Equity Valuation Meets the Sigmoid Growth Equation: The Gordon Growth Model Revisited

The valuation of equity is a central topic in finance and accounting from many fronts. However, equity valuation is still subjective as different analysts obtain target prices that are not similar despite using the same publicly available information. Growth has a substantial influence on the value of equities when using Gordon Growth Model. Nevertheless, initial high growth and a constant growth to perpetuity assumption whereby a company continues to grow indefinitely is considered to be naive and simplistic. Therefore, this study proposes the use of sigmoid growth curve equation that is expected to better capture practicalities of firm growth. The sigmoid curve consists of lag, exponential, stationary and decline phases. The aim of this study was to provide evidence of sigmoid growth patterns of Johannesburg Securities Exchange listed companies and to propose a model for valuing equities using principles behind the sigmoid growth curve. This has implications for improving accuracy when approximating the value of equities, detecting mispriced stocks and informing buy/sell decisions. For this purpose, cumulative sustainable growth patterns of 64 JSE listed companies were examined using data from 1994 to 2014, followed by curve fitting to determine whether the profiles were sigmoid. Interestingly, 50% of the firms showed typical sigmoid growth patterns. Ultimately, a model was developed for valuing equities by replacing growth, g, in the Gordon Growth Model with equivalent parameters in the sigmoid equation. In conclusion, the findings of this study accentuate that the Gordon Growth Model for equity valuation must factor in the complex growth parameters of firms in order to circumvent mispricing shares.

Evaluating the Use of Double Asian Options in Volatile Markets

In turbulent and volatile markets options can be a preferred asset class for protection against adverse market movements. When volatility increases and markets become sparsely traded, it is not always effective to hedge adverse market movements using any option. Options, where the underlying is based on the average prices (syn. Asian options) was argued to be a reasonably good instrument in hedging sparsely traded markets. In this paper, double Asian options in volatile markets is evaluated. The double Asian option payoff is shown to be favourable over that of European and single Asian options, especially in volatile and trending markets. The double Asian option pricing can be hurdle in the effective evaluation. This paper gives a note on the consistent pricing of double Asian options, and consequently the effective use of these options in volatile markets.

An Interest Rate Commission Agent Banking System

The financial crises emanating from bank run, bad debt, asset-liability mismatch, excessive leverage, sovereign default that result in bank failure have not been solved. In order to solve these problems, banks adopted several models even though each banking business model was a catalyst for financial crisis. However, these problems can be solved by applying an interest rate commission agent banking system (AIRCABS), which is a system where the bank is an agent for investors’ loan funding to entrepreneurs by setting up an agreement between the fund seller, and buyer and administering the loan after disbursement. The bank then retains a reasonable commission from the agreed investor’s loan funding contract. As interest rates increase, the demand for funding loan to entrepreneur through AIRCABS also increases.

Liquidity Effects on Value-at-Risk Limits: Construction of a New VAR Model

Value-at-risk (VaR) is a common tool applied by market makers to monitor the risk of any trading position. The conventional VaR model assumes a frictionless market, which is seldom the case. The 2008 financial market crisis exposed the inadequacies of VaR limits, which do not factor in liquidity risk. Various liquidity adjusted VaR models exist in an attempt to correct this anomaly. Our study presents a new VaR model that incorporates intraday price movements on high-low spreads and adjusts for a trade impact measure a novel sensitivity measure of price New symbol chosen to denote movements due to trading volumes. The new VaR model returns violations that are independent and identically distributed for 94% of the trading counters backtested over a one-year period of trading on the Johannesburg Stock Exchange using Kupiec’s test of unconditional coverage. The Christoffersen test of independence returns 96% of violations that are neither autocorrelated nor clustered, while the Christoffersen joint test of conditional coverage shows that the average number of violations is correct 93% of the time at 99% significance levels. The new model is valid and robust for the standard VaR backtests conducted.

Students Perception on the Entrepreneurship Curriculum at the University of South Africa's Department of Agriculture and Animal Health

Abstract Entrepreneurship continues to assume a vital role in the South African economy as well as the economies of many developing nations across the globe. The creation of new business activities has become a major driver in the economy. South Africa has a high number of unemployed graduates in the agricultural sector across all disciplines. However, there has been a pervasive culture in the South African education system that when agricultural students complete their programmes at universities they prefer to work for government as extension and advisory services personnel, at research institutions and other related sectors. The study was conducted to assess whether the training provided as part of the curriculum creates opportunities for entrepreneurship for both undergraduate and postgraduate students at the University of South Africa (UNISA) within the Department of Agriculture and Animal Health. Work-integrated learning (WIL) offers students the chance to learn more about the working environment. There is unwillingness on the part of female students to become entrepreneurs. The Limpopo and KwaZulu-Natal provinces have a large number of students who are interested in entrepreneurship. The curriculum offers students training in innovation and organisational skills, but it is apparent that this programme does not assist in the development of students to embrace entrepreneurship. Students are not prepared to start their own businesses after completing of their studies, however, they prefer to work full-time while running their own businesses part-time.