Whether the conflict that was started on November 3, 2020, in Northern Ethiopia will be short-liv... more Whether the conflict that was started on November 3, 2020, in Northern Ethiopia will be short-lived or a protracted one that turns itself into a stalemate, guerrilla warfare and draws the Greater Horn of Africa region into larger conflict is unclear. The spark of November 3, 2020, was a result of the simmering tensions that were allowed to build up within the once invincible ethnic coalition that ruled Ethiopia for 27 years. TThe cleavages cut through all state institutions, including in the defense and security establishments. In this short paper, I attempt to provide a rejoinder to show that “the Tigray conflict” has as much to do with resource control as it is with politics. De-escalation of the conflict requires the understanding of the stakes for the parties to the conflict. The ownership and management of party-affiliated endowment companies are one of the economic dimensions of the conflict. The paper outlines the pros and cons of various reform options.
This paper investigates whether investors in an emerging economy setting value book value of equi... more 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.
The aim of this paper is to examine the role of institutional-, macroeconomic-, industry-, and fi... more The aim of this paper is to examine the role of institutional-, macroeconomic-, industry-, and firm-characteristics on the adjustment speed of corporate capital structure in the context of nine (9) African countries. We consider a sample of 986 firms over a period of 10 years (1999–2008). Based on an assumption that firms may temporarily deviate from their target capital structure, we employ dynamic adjustment models that link capital structure adjustment speed and institutional-, macroeconomic-, and firm-characteristics. Our results provide strong support for the hypothesis that a firm’s capital structure does temporarily deviate from and partially adjusts to an optimal capital structure. In terms of determinants of adjustment speed, our results indicate that: firm profitability tends to have a robustly significant and positive effect on firms’ adjustment speed while the effect of firm size, growth opportunities, and the gap between observed and target leverage on adjustment speed is dependent on how leverage is defined; firms in more risky industries adjust faster than those in less risky ones; firms in countries with common law tradition tend to more rapidly adjust their capital structure towards the optimal than their counterparts in countries with civil law tradition; capital structure adjustment speed generally tends to decrease with increase in per capita income levels of countries; and more developed stock markets and better creditor rights protection have a negative effect on the speed at which firms adjust their capital structure towards the target.
This research determines whether South African firms engaging in MA both of which produced negati... more This research determines whether South African firms engaging in MA both of which produced negative results.
Abstract: If the news is true, it suggests that Egypt and Ethiopia are in dispute and are looking... more Abstract: If the news is true, it suggests that Egypt and Ethiopia are in dispute and are looking for outside arbitration, mediation and conciliation
South African Journal of Accounting Research, 2009
This review documents the conceptual, methodological and policy issues that relate to the domain ... more This review documents the conceptual, methodological and policy issues that relate to the domain of financial reporting research that attempts to examine whether there are measurable gains, (if any) stemming from the adoption of international financial reporting standards, (IFRS). It selects and reviews four recent papers from conceptual, research design and policy perspectives. Information content, uncertainty-disclosure, value relevance, and earnings and accounting quality studies have all attempted to show the benefits of finer and increased information environments. Notwithstanding the early evidence, this review argues that the papers face both epistemological and research design problems, in that IFRS adoption effect studies do not take cognizance of the contributions of the literature on behavioral finance, financial integration, project analysis, regulation, earnings sustainability and market microstructure. In addition, the studies ignore the possibility that the greater percentage of the benefits and costs may not be directly observable. The review is done against the backdrop of the recent financial crisis.
ABSTRACT In this paper the authors examine the problem of dating stock market liberalization usin... more ABSTRACT In this paper the authors examine the problem of dating stock market liberalization using time series of South African stock market data. Defining the date of stock market liberalization as that on which there is a structural change in time series data, they test for structural breaks. They perform tests on time series of monthly dividend yields and report two structural breaks. Noteworthy is that the structural breaks occurred earlier than the JSE's official liberalization date of March 1995, thus suggesting political and economic risks were the more binding constraints to foreign investment than legal barriers.
ABSTRACT This paper aims to examine the adjustment speed of debt maturity structures within the c... more ABSTRACT This paper aims to examine the adjustment speed of debt maturity structures within the context of African countries. Dynamic adjustment models using system GMM proposed by Blundell and Bond (1998) were employed to analyze data pertaining to 986 non-financial firms drawn from nine African countries. We find evidence that firms in Africa adjust their debt maturity structures to a target. Our results also indicate that the legal protection afforded to investors and the efficiency of the legal system enhance the pace at which firms in Africa rebalance their debt maturity structures. The evidence shows that firms in richer and fast growing economies experience comparatively rapid adjustments to their debt maturity structures than is the case in poorer and slow-growth economies. In addition, the size and growth prospects of firms positively enhance adjustment speed while the distance from optimal maturity structures deters the rebalancing pace. These findings signify the role that agency, bankruptcy and transaction costs, liquidity pressure and financial flexibility play in the maturity structures decision of firms in Africa.
Extracted from text ... Number 54 - Part 3 M Negash* Debt, tax shield and bankruptcy costs: Some ... more Extracted from text ... Number 54 - Part 3 M Negash* Debt, tax shield and bankruptcy costs: Some evidence from JSE *School of Accountancy, The University of the Witwatersrand, Private Bag 3, Wits 2050, Republic of South Africa. Email: mnegash@isys.wits.ac.za 1. Introduction One of the contentious issues of corporate finance is the theory of capital structure. Modigiliani and Miller (1963) show the 'irrelevance' of capital structure in the absence of market imperfections. This conclusion however changes when market imperfections are invoked. When corporate taxes are considered and the firm is allowed to source its finances both from owners and lenders, the value of the ..
South African Journal of Accounting Research, 2006
This paper examines the Ohlson (1995) model and documents its validity in explaining share prices... more This paper examines the Ohlson (1995) model and documents its validity in explaining share prices using data for 129 firms continuously listed on the Johannesburg Securities Exchange (JSE hereafter), over a twelve year period. More specifically, cross-sectional multiple regressions and panel data least squares procedures are used to examine whether accrual accounting information and a residual income model are useful in explaining variations in year-end share prices. The cross-sectional results indicate that the Ohlson (1995) model does not establish a significant relationship between year-end share prices and accrual accounting information. However, the panel data least square model resulted in significant and positive relationships between year-end share prices and abnormal earnings, abnormal cash dividends and book value of assets.
Traditional trade off models of capital structure advocated that the gains from leverage be balan... more Traditional trade off models of capital structure advocated that the gains from leverage be balanced against the potential costs of distress and bankruptcy. More recent studies however show that the trade off theory does not fully explain the behavior of South African managers. Using JSE industrial sector data, this paper replicates the Shyam-Sunder and Myers (1999) work to identify whether trade off theory or pecking order theory explains the behavior of South African managers better. Results indicated that both models are useful, but pecking order dominates the target adjustment model for small sized firms.
Knowledge assets, intellectual capital, goodwill and intangibles are being used interchangeably i... more Knowledge assets, intellectual capital, goodwill and intangibles are being used interchangeably in the extant literature. Existing GAAPs do not allow the recognition and/or disclosure of the greater portion of these assets in the corporate report. Studies that focused on the pricing of intangibles examined R&D and patent data. The book to market (price) ratio is another proxy. Using latent variables in a structural equation-modeling framework, this paper makes analysis of data obtained from JSE, annual reports and intellectual property archives to examine whether intangibles are priced by the stock market. Results indicate that changes in the price to book ratio are explained by changes in the buy-sell spread and, the change in the spread is in turn associated with the presence/absence of intangibles.
The 1990s witnessed a worldwide trend of 'democratizing' governance systems. The emergenc... more The 1990s witnessed a worldwide trend of 'democratizing' governance systems. The emergence of 'new generation' of African leaders brought both hope and despair. The continental and regional institutions were reconfigured to become instruments of reform. Hence, the New Economic Partnership for Africa's Development (NEPAD) and the African Peer Review Mechanism (APRM) dominated the debate in Africa. Central to this debate is the concept of accountability. This paper uses a microeconomic (agency) framework and managerial accounting innovations to (better) understand issues of accountability in Africa's public sector institutions. Noteworthy are the identification of the two-stage agency problem in public sector institutions and the development of a multidimensional scorecard for APRM.
Whether the conflict that was started on November 3, 2020, in Northern Ethiopia will be short-liv... more Whether the conflict that was started on November 3, 2020, in Northern Ethiopia will be short-lived or a protracted one that turns itself into a stalemate, guerrilla warfare and draws the Greater Horn of Africa region into larger conflict is unclear. The spark of November 3, 2020, was a result of the simmering tensions that were allowed to build up within the once invincible ethnic coalition that ruled Ethiopia for 27 years. TThe cleavages cut through all state institutions, including in the defense and security establishments. In this short paper, I attempt to provide a rejoinder to show that “the Tigray conflict” has as much to do with resource control as it is with politics. De-escalation of the conflict requires the understanding of the stakes for the parties to the conflict. The ownership and management of party-affiliated endowment companies are one of the economic dimensions of the conflict. The paper outlines the pros and cons of various reform options.
This paper investigates whether investors in an emerging economy setting value book value of equi... more 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.
The aim of this paper is to examine the role of institutional-, macroeconomic-, industry-, and fi... more The aim of this paper is to examine the role of institutional-, macroeconomic-, industry-, and firm-characteristics on the adjustment speed of corporate capital structure in the context of nine (9) African countries. We consider a sample of 986 firms over a period of 10 years (1999–2008). Based on an assumption that firms may temporarily deviate from their target capital structure, we employ dynamic adjustment models that link capital structure adjustment speed and institutional-, macroeconomic-, and firm-characteristics. Our results provide strong support for the hypothesis that a firm’s capital structure does temporarily deviate from and partially adjusts to an optimal capital structure. In terms of determinants of adjustment speed, our results indicate that: firm profitability tends to have a robustly significant and positive effect on firms’ adjustment speed while the effect of firm size, growth opportunities, and the gap between observed and target leverage on adjustment speed is dependent on how leverage is defined; firms in more risky industries adjust faster than those in less risky ones; firms in countries with common law tradition tend to more rapidly adjust their capital structure towards the optimal than their counterparts in countries with civil law tradition; capital structure adjustment speed generally tends to decrease with increase in per capita income levels of countries; and more developed stock markets and better creditor rights protection have a negative effect on the speed at which firms adjust their capital structure towards the target.
This research determines whether South African firms engaging in MA both of which produced negati... more This research determines whether South African firms engaging in MA both of which produced negative results.
Abstract: If the news is true, it suggests that Egypt and Ethiopia are in dispute and are looking... more Abstract: If the news is true, it suggests that Egypt and Ethiopia are in dispute and are looking for outside arbitration, mediation and conciliation
South African Journal of Accounting Research, 2009
This review documents the conceptual, methodological and policy issues that relate to the domain ... more This review documents the conceptual, methodological and policy issues that relate to the domain of financial reporting research that attempts to examine whether there are measurable gains, (if any) stemming from the adoption of international financial reporting standards, (IFRS). It selects and reviews four recent papers from conceptual, research design and policy perspectives. Information content, uncertainty-disclosure, value relevance, and earnings and accounting quality studies have all attempted to show the benefits of finer and increased information environments. Notwithstanding the early evidence, this review argues that the papers face both epistemological and research design problems, in that IFRS adoption effect studies do not take cognizance of the contributions of the literature on behavioral finance, financial integration, project analysis, regulation, earnings sustainability and market microstructure. In addition, the studies ignore the possibility that the greater percentage of the benefits and costs may not be directly observable. The review is done against the backdrop of the recent financial crisis.
ABSTRACT In this paper the authors examine the problem of dating stock market liberalization usin... more ABSTRACT In this paper the authors examine the problem of dating stock market liberalization using time series of South African stock market data. Defining the date of stock market liberalization as that on which there is a structural change in time series data, they test for structural breaks. They perform tests on time series of monthly dividend yields and report two structural breaks. Noteworthy is that the structural breaks occurred earlier than the JSE's official liberalization date of March 1995, thus suggesting political and economic risks were the more binding constraints to foreign investment than legal barriers.
ABSTRACT This paper aims to examine the adjustment speed of debt maturity structures within the c... more ABSTRACT This paper aims to examine the adjustment speed of debt maturity structures within the context of African countries. Dynamic adjustment models using system GMM proposed by Blundell and Bond (1998) were employed to analyze data pertaining to 986 non-financial firms drawn from nine African countries. We find evidence that firms in Africa adjust their debt maturity structures to a target. Our results also indicate that the legal protection afforded to investors and the efficiency of the legal system enhance the pace at which firms in Africa rebalance their debt maturity structures. The evidence shows that firms in richer and fast growing economies experience comparatively rapid adjustments to their debt maturity structures than is the case in poorer and slow-growth economies. In addition, the size and growth prospects of firms positively enhance adjustment speed while the distance from optimal maturity structures deters the rebalancing pace. These findings signify the role that agency, bankruptcy and transaction costs, liquidity pressure and financial flexibility play in the maturity structures decision of firms in Africa.
Extracted from text ... Number 54 - Part 3 M Negash* Debt, tax shield and bankruptcy costs: Some ... more Extracted from text ... Number 54 - Part 3 M Negash* Debt, tax shield and bankruptcy costs: Some evidence from JSE *School of Accountancy, The University of the Witwatersrand, Private Bag 3, Wits 2050, Republic of South Africa. Email: mnegash@isys.wits.ac.za 1. Introduction One of the contentious issues of corporate finance is the theory of capital structure. Modigiliani and Miller (1963) show the 'irrelevance' of capital structure in the absence of market imperfections. This conclusion however changes when market imperfections are invoked. When corporate taxes are considered and the firm is allowed to source its finances both from owners and lenders, the value of the ..
South African Journal of Accounting Research, 2006
This paper examines the Ohlson (1995) model and documents its validity in explaining share prices... more This paper examines the Ohlson (1995) model and documents its validity in explaining share prices using data for 129 firms continuously listed on the Johannesburg Securities Exchange (JSE hereafter), over a twelve year period. More specifically, cross-sectional multiple regressions and panel data least squares procedures are used to examine whether accrual accounting information and a residual income model are useful in explaining variations in year-end share prices. The cross-sectional results indicate that the Ohlson (1995) model does not establish a significant relationship between year-end share prices and accrual accounting information. However, the panel data least square model resulted in significant and positive relationships between year-end share prices and abnormal earnings, abnormal cash dividends and book value of assets.
Traditional trade off models of capital structure advocated that the gains from leverage be balan... more Traditional trade off models of capital structure advocated that the gains from leverage be balanced against the potential costs of distress and bankruptcy. More recent studies however show that the trade off theory does not fully explain the behavior of South African managers. Using JSE industrial sector data, this paper replicates the Shyam-Sunder and Myers (1999) work to identify whether trade off theory or pecking order theory explains the behavior of South African managers better. Results indicated that both models are useful, but pecking order dominates the target adjustment model for small sized firms.
Knowledge assets, intellectual capital, goodwill and intangibles are being used interchangeably i... more Knowledge assets, intellectual capital, goodwill and intangibles are being used interchangeably in the extant literature. Existing GAAPs do not allow the recognition and/or disclosure of the greater portion of these assets in the corporate report. Studies that focused on the pricing of intangibles examined R&D and patent data. The book to market (price) ratio is another proxy. Using latent variables in a structural equation-modeling framework, this paper makes analysis of data obtained from JSE, annual reports and intellectual property archives to examine whether intangibles are priced by the stock market. Results indicate that changes in the price to book ratio are explained by changes in the buy-sell spread and, the change in the spread is in turn associated with the presence/absence of intangibles.
The 1990s witnessed a worldwide trend of 'democratizing' governance systems. The emergenc... more The 1990s witnessed a worldwide trend of 'democratizing' governance systems. The emergence of 'new generation' of African leaders brought both hope and despair. The continental and regional institutions were reconfigured to become instruments of reform. Hence, the New Economic Partnership for Africa's Development (NEPAD) and the African Peer Review Mechanism (APRM) dominated the debate in Africa. Central to this debate is the concept of accountability. This paper uses a microeconomic (agency) framework and managerial accounting innovations to (better) understand issues of accountability in Africa's public sector institutions. Noteworthy are the identification of the two-stage agency problem in public sector institutions and the development of a multidimensional scorecard for APRM.
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