Minga Negash

Liberalisation and the value relevance of accrual accounting information: evidence from the Johannesburg securities exchange

Using panel data from 118 firms across a time period of 17 years and a battery of tests, this paper examines two research questions that pertain to the expected gains stemming from corporate information liberalisation through the adoption of international accounting (financial reporting) standards. Results indicated that accrual accounting data at aggregate (market-wide) level did not show break point(s) around the time of critical corporate information liberalisation years. At the microlevel, panel data tests on a version of Ohlsons (1995) model showed poor fits, but initially indicated some improvement (adjusted R-squares of between 12% and 25%) in value relevance in the post-information liberalisation period. However, when scale issues were addressed in cross-sectional level-type panel regressions, the difference in the R-squares vanished; suggesting that the value relevance of accounting information did not improve in the post-liberalisation period.

Institutional, macroeconomic and firm-specific determinants of capital structure: The African evidence

Purpose - – The study aims to investigate the role of institutions, macroeconomic conditions, industry and firm characteristics on firms capital structure decision within the context of nine African countries. Design/methodology/approach - – A sample of 986 firms over the period 1999-2008 were analysed using a series of models that link institutional, macroeconomic, industry and firm-specific characteristics, on the one hand, and measures of capital structure, on the other. The paper used system generalized method of moments and seemingly unrelated regression which are robust to data heterogeneity and endogeneity problems to estimate the relationships between variables. Furthermore, the paper checked the robustness of findings using various estimation procedures. Findings - – The paper found evidence that the legal and financial institutions, income level of the country in which a firm operates, growth rate of the economy and inflation matter in capital structure choices of firms in the sample countries. Furthermore, capital structure choice of firms in the sample countries was affected by industry and firm-specific characteristics. These findings signify the role that probability of bankruptcy, agency costs, transaction costs, tax issues, information asymmetry problems, access to finance and market timing play in capital structure decisions of firms in Africa. Research limitations/implications - – As in most empirical studies, this study focused on listed firms. Nonetheless, future studies that focus on non-listed firms could add additional insights to the extant literature. Practical implications - – The findings have practical implications for corporate managers, governments, legislators and policymakers in the African continent. Originality/value - – The study focuses on firms in African countries for which cross-country studies such as this are rare. It also explicitly models industry variable as one of the determinants of capital structure, a marked departure from previous studies on capital structure decision of firms.

IFRS and Environmental Accounting

Purpose - The purpose of this paper is to examine whether International Financial Reporting Standards (IFRS) can be used for monitoring environmental degradation. A comprehensive review of academic and professional literature indicates that the IFRS regime provides useful conceptual and practical frameworks for monitoring firms that are operating in environmentally sensitive industries. Design/methodology/approach - Using qualitative and case study research methods, the financial statements of three environmentally sensitive companies were studied. Findings - The sustainability reports produced by the companies contained both information and propaganda. The credibility of published sustainability reports is unclear. The size and adequacy of the contributions of the companies towards sharing the costs of decommissioning, rehabilitation and restoration of the environment are not disclosed. A new statement is proposed. Practical implications - Policy implications at national and international level are many. Social implications - The paper shows that environment has both financial and non-financial implications. The effects of environmental degradations on the habitat and society are serious. Originality/value - The paper contributes to new knowledge in several ways. There are at least three major conclusions from this paper, and the ideas are original.

Ethiopian Diaspora Investment Potential and EEPCO's Millennium Bond

A number of studies have examined why Diasporas invest in their homelands. The reasons include emotions, sense of duty, social networks, strength of Diaspora organizations and high returns. As of late Diaspora bonds have been found to be useful vehicles for channeling finance from developed countries to developing regions of the world. This short commentary examines Ethiopias first Diaspora bond. The bond was issued in 2008 by the state owned power utility company, EEPCO. The article examines the elements of the bond, and provides suggestions for making the bond investible.

The value creation effects of mergers and acquisitions : evidence from the JSE Securities Exchange South Africa

This research determines whether South African firms engaging in MA both of which produced negative results.

Resource allocation challenges in South African universities: a management accounting perspective

This paper makes a critical appraisal of the resource allocation process in a South African university that attempts to improve its rating in international benchmarks. Using the University of the Witwatersrand as a case study, the paper documents its challenges, and develops a balanced scorecard for one of its professional academic units. The paper contributes to the literature on higher education management, and indicates that decentralisation reduces the problem of attraction and retention of academic staff, and examines the tensions between teaching and research on one hand, and professional schools and senior management on the other hand.

Rethinking Corporate Governance in Ethiopia

This paper deals with the corporate governance thematic area of the African Peer Review Mechanism (APRM). Its contribution to the literature is twofold: (1) It provides additional evidence that a microeconomic perspective of studying governance leads to a better understanding of key reform issues in many Sub Sahara African (SSA) economies; and (2) With regard to Ethiopia, the paper surmises that the overall standard of corporate governance is disappointing. More specifically, the legal and constitutional instruments do not provide adequate legislative; key international conventions and standards are not ratified; political parties own substantial number of business enterprises and operate in key sectors of the economy; ownership concentration through pyramid structure introduces particular problems of agency and creates crony capitalism; investor and creditor protection laws are inadequate; the absence of organized equity market is a serious void, and finally with regard to professional education, the increase in the number of tertiary institutions granting degrees and diplomas is not matched by sound quality standards. The reform debate will have to find solutions to these problems.

Market Reaction to Earnings Management: New Evidence from the Johannesburg Securities Exchange

This paper investigates whether investors in an emerging economy setting value book value of equity, earnings and discretionary accruals differently for firms that have managed earnings relative to those who have not. Discretionary accruals are estimated using the conventional modified John’s model Dechow, Sloan, and Sweeny (1995) and the less commonly used but more powerful Ball & Shivakumar’s (2006) model. The distributions of earnings were examined using the kernel density function (Lahr, 2014). To test whether the market values earnings management (EM) and non-earnings management firms (non-EM) firms differently, two value relevance models that are similar to (Lev & Sougiannis, 1999; Ohlson, 1995) and cumulative abnormal stock returns were developed. We find that over four time windows ending 30 days after the date that the directors’ report is signed, investors appear to be able to negatively price discretionary accruals estimated using the Ball and Shivakumar (2006) model, but this reaction is not significantly different between EM and non-EM firms. The paper provides evidence and contributes to the methodological debate on earnings management research in emerging markets.

Financing Challenges for Water and Sanitation Services: The Case of South Africa's Local Governments and Municipalities

The paper is the third and final document which was prepared for the finance syndicate team at the joint gathering (indaba) of local government leaders and water experts. It addresses the financial issues of water and sanitation service provision in South Africa. Access to finance is an essential part of local capacity building to develop and manage water services in a sustainable way. Funding flows should double to meet the MDGs and financing institutions should adjust their instruments to enhance the supply of finance for the sub-sovereign level as recommended in the report of the Panel on Financing Water Infrastructure under the chairmanship of Michel Camdessus in 2003. ODA and government allocations have not been sufficient. Furthermore, the importance of rural and urban local governments is growing because of decentralization and constitutional imperatives. The bulk of the finance originates from contribution of users of the services and taxpayers. However, the main obstacle in increasing the financial flows is the local capacity. In this paper we attempt to document the demand side of the local actors and the development of proper water service action plans to enhance access to finance for local governments. We have posted it in social science research network so that researchers in other developing environments can benefit from South Africas experience.

Explaining the Ethiopian Outmigration: Incentives or Constraints?

[enterIn both theory and practice, pull and push factors drive migrants out of their own countries of origin. The factors are complex but they are in general categorized as: (a) demand-pull factors, represented by better economic opportunities and jobs in the host (new) country; (b) supply-push factors, represented by poverty, the lack of economic opportunities and prospects, jobs, and economic downturns, political oppressions, abuses of human rights by home country governments, religious intolerance (constraints), war, conflict and insecurity in the home country; (c) mediating factors that accelerate or constrain migration which may include the existence or prevalence of opportunities available to human smugglers, fly by night recruitment agencies, registered recruitment agencies operating within the legal system and government policies encouraging/incentivizing citizens to migrate; and (d) social network (pull) factors such as the existence of relatives, friends and acquaintances in host countries, available opportunities for family unifications in host countries, or when individuals send money to bring other family members to join them into the new (host) country- a chain migration which results in migration fields or clustering of people from a specific countries into certain neighborhoods or small towns in the new (host) countries (e.g. China Town, Vietnamese Town, Ethiopia Town, etc. in North America); this latter at times known as chain migration. And success stories of diaspora migrants and networks. The role played by each of these factors and their relative importance and dynamics depend on the economic, political, societal conditions and geographical proximity between the home, transit and destination countries. In attempting to explain the Ethiopian outmigration, our conjuncture is that the push factors play the dominant role in driving out Ethiopians out of their country, prominent among them being abject poverty and bad governance. Bad governance and economic constraints are indeed highly correlated, for bad governance basically means the lack of rule of law, political freedom, accountability, transparency, efficient institutions and increased corruption and insecurity. Development economists have repeatedly shown that bad governance plays significant roles in retarding development in addition to exacerbating economic inequality, increasing poverty, corruption, conflicts and environmental degradation. Abstract Body]