Phillip de Jager

Purpose: We investigate the correlation between capital structure and a set of, mostly, standard capital structure determinants for a unique sample: Global Systemically Important Banks (G-SIBs).

Design/methodology/approach: We augment the standard set of regression determinants with a proxy measure of pro-public orientation (DataStream’s Refinitiv Environmental, social and governance [ESG] scores). We expect to find that a more pro-public orientated G-SIB holds
more capital. This is because very large and systemic banks underpin the functioning of society. The public, therefore, has a direct interest in bank safety with a better capitalised bank being a safer bank. On the other hand, shareholders of a safer bank suffer because of lower profitability.
Findings/results: Initial results indicated no relation between pro-public orientation and bank leverage; however, further analysis showed that bank leverage decreases as the governance component score increases. This suggests that the governance of G-SIBs is important for financial stability. Bank size was found to have no intermediation effect on the relationships,
implying that our results are not because of a clustering among the largest banks. Correlations between the control variables and bank leverage provide support for the argument that bank leverage is not solely determined by regulations.

Originality/value: We extend recent work on social ratings and capital structure in nonfinancial firms to banks. Our results provide further support for the proposition that the drivers of the capital structures of non-financial firms also determine those of banks, weakening the argument that capital regulation is the sole determinant of bank capital structures. Our sample focuses attention on a core financial decision of very important, if not the most important, players in the global economy.

Keywords: bank capital; environmental, social and governance (ESG) score; global systemically important banks (G-SIBs); banks; capital structure.

The global distribution of Christians is expected to change by 2050, with the largest proportion of Christians – more than a billion – residing in sub-Saharan Africa. Historical and empirical studies have argued for a positive relationship between the proportion of Christians – Protestants in particular – and the development of liberal democracy. A key  explanation for this positive influence is cultural, namely the valuing of the individual. Could the growth in Christianity have the potential to influence democratic development and good governance in the sub-Saharan region? To test our hypotheses – (1) sub-Saharan states with proportionally larger Protestant populations are more likely to have higher levels of democracy and good governance, and (2) sub-Saharan states with growing Protestant populations are more likely to have increasing levels of democracy and good governance – we employ a longitudinal and cross-sectional study (a panel of data) using data from the World Christian Database, Polity IV and the International Country  Risk Guide. Our data show that the population share of Protestants is positively related with both levels of and growth in democracy and good governance. With the spread of Protestantism we could expect the future improvement of democracy and governance in the region.

Research findings on the role of fair value accounting (FVA) in the global financial crisis suggest that FVA is not applied neutrally by banks. The results of FVA are accepted when they contribute to higher profits and are actively resisted when they lead to losses. The aim of this article is to investigate how FVA is practically applied by banks in detail. The focus is on banks as most of their assets are financial instruments and thus potentially fair valued, and banks’ behaviour is significantly influenced by their regulatory environment. The research objective is pursued by using a case study of two South African banks. One of these is the largest and most systemically important bank in the South African system and the other is on the crossover between systemic and not systemic. It is found that FVA as applied by these two banks is not  neutral. Also included is a demonstration of a method to derive the unrealised portion of profit and equity, the identification of the gap between assets and liabilities at fair value as the driver of where in a banking group FVA profits and losses are realised, and the finding that the restatement of comparative figures was used to circumvent the prohibition on reclassifications into and out of the ‘designated as at fair value’ category.

Purpose – This paper investigates the production of accounting doctorates in South Africa during the period from 2008 to 2014. The investigation was prompted by calls to qualify more academics at the doctoral level, bearing in mind that postgraduate supervision forms part of an academic’s core teaching responsibilities.
Design/methodology/approach – This archival study uses data obtained from the institutional repositories of four research intensive universities in South Africa to construct a profile of the accounting doctoral theses produced during the period from 2008 to 2014.
Findings – The findings indicate an alignment with international trends towards a higher doctoral output in accounting and thus an increasing research orientation in South African university accounting departments; which in turn demands an increase in supervisory capacity. The accounting doctorates analysed in this paper were longer and supervised by more people than the typical commerce faculty doctorate.
Research limitations/implications – Not all South African universities were included in the study and therefore some accounting doctorates might have been excluded from it. In addition, accounting education doctorates, possibly supervised in faculties of education, would also be excluded in view of the approach followed in this paper, which was to identify accounting doctorates via departments and commerce faculties.
Originality/value – This article is the first of its kind to examine the accounting doctorates produced in South Africa since Van der Schyf’s (2008) call for the establishment of a research culture in the accounting departments of South African universities. As such, this article makes an important contribution towards how such a research culture may be enhanced through cultivating doctoral education in this context.

A topic of recent interest in accounting research has been the investigation of the role of fair value accounting (FVA) in the global financial crisis. This research focused on finding a link during the crisis time-period and often states that “accounting is only a messenger”. The model presented in this paper emphasises finding the link before the crisis and “accounting as money.” Use is made of an accounting model of the economy due to the inability of standard models of monetary transmission to incorporate global financial crisis characteristics such as feedback effects, systemic risk and the centrality of the financial sector in the crisis. The model shows FVA in banks to be an accelerator that amplifies the financial cycle upswing. Feedback effects noted in the model include changes in the demand for financial instruments and changes in demand in the real economy. Minsky-like, crisis is shown to be endogenous to the model, working through the fragility of balance sheets in the real sector as well as in the financial sector. Bank balance sheet fragility is caused by bad capital driving out good capital, banks reaching for yield and the inversion of the yield curve. The model shows that the practice of not meeting rising credit demand with increasing credit supply is an essential control mechanism in the financial cycle.

... 2.1.4 Liquidity Draw Downs in 2007 (Crisis) This paper is centred on the events of 2007 that caused ABCP conduits to request draw downs from liquidity providers. ... ABCP conduit market, all liquidity providers honoured their liquidity commitments in full when drawn. ...

DESCRIPTION Another test of Elton & Gruber's (1970) hypothesis. Contribution is a) a new context; b) more reasonable assumption made that marginal shareholder is equal to average shareholder and c) dividend tax change took place during flat business cycle isolating tax effect better. Results show that tax effect is valid together with other effects.

Purpose: We investigate the correlation between capital structure and a set of, mostly, standard capital structure determinants for a unique sample: Global Systemically Important Banks (G-SIBs).Design/methodology/approach: We augment the standard set of regression determinants with a proxy measure of pro-public orientation (DataStream’s Refinitiv Environmental, social and governance [ESG] scores). We expect to find that a more pro-public orientated G-SIB holds more capital. This is because very large and systemic banks underpin the functioning of society. The public, therefore, has a direct interest in bank safety with a better capitalised bank being a safer bank. On the other hand, shareholders of a safer bank suffer because of lower profitability.Findings/results: Initial results indicated no relation between pro-public orientation and bank leverage; however, further analysis showed that bank leverage decreases as the governance component score increases. This suggests that the go...

Fair value accounting has been named by some as a role-player in the recent financial crisis. The initial defensive argument that accounting is only a messenger is easily dispelled by considering its vital role in banking and bank supervision, as well as its real-world implications. Yet, a second argument deserving further scrutiny states that prudential filters under the Basel Accords neutralise most fair value accounting gains and losses, which limits this source of volatility. Using South Africa as a representative case, this study compares evidence from (1) a questionnaire, (2) a key informant interview and (3) regulatory publications to investigate the use of accounting information in bank supervision, and to test whether all fair value gains and losses are, in fact, neutralised. This study found that fair value gains and losses through profit and loss (under IAS 39 (2010)) have not been neutralised by the South African regulator in its application of the Basel II framework since January 2008. A strong disconnect between the need for prudent information by regulators and the neutral information provided by accounting is also identified. Significantly, the results of this study dispel a core argument which so far has helped to shield fair value accounting from blame, but the importance is tempered by the fact that only South African evidence was considered.

Purpose Doctoral students’ ill-being in terms of stress, exhaustion and high levels of mental health problems has been well documented. Yet, the well-being of doctoral students is more than the absence of these negative symptoms. The number of studies exploring the combination of positive and negative attributes of doctoral students’ well-being is limited. Therefore, this study aims to focus on exploring individual variation in doctoral students’ experienced engagement and burnout across two distinct socio-cultural contexts in Finland and in South Africa. Design/methodology/approach A total of 884 doctoral students from Finland (n = 391) and South Africa (n = 493) responded to the cross-cultural Doctoral Experience Survey. The data were quantitatively analyzed. Findings Altogether four distinctive engagement–burnout profiles were detected, including engaged, engaged–exhausted, moderately engaged–burnout and burnout profiles. Differences between the Finnish and South African students...

5Most researchers who investigate the interplay between fair value accounting (FVA) and the financial crisis look at the time period during the crisis. This paper investigates a potential role for FVA prior to the crisis: If FVA led to increased accounting profits with the recognition of transitory gains through profit and loss during the boom, and if those increased profits provided the rationale for increased dividends, then bank capital became riskier prior to the crisis, and this would have made the system more prone to failure. A study by Goncharov and Van Triest (2011) found no empirical support for an increase in dividends in response to unrealised positive fair value adjustments to income. In contrast, when the setting is limited to only South African banks, this paper finds that South African banks did pay dividends from unrealised transitory gains. This finding is based on a combination of three strands of evidence: a panel regression of the annual dividends declared by th...

The ongoing London Interbank Offer Rate (LIBOR) scandal has contributed to a general distrust in banks. Regulators from across the world are investigating for similar problems in their local markets. South African regulators were quick to report that the Johannesburg Interbank Agreed Rate (JIBAR) is different from LIBOR by being an “actual” interest rate with the implication that manipulation is unlikely. The record of the LIBOR scandal shows that regulators are likely to downplay the events and rather change the system for the better behind the scenes. This possibility, the fact that JIBAR is much more susceptible to manipulation by individual banks than LIBOR and the fact that four international banks, implicated in the LIBOR scandal, participated in setting JIBAR (out of nine contributors) motivates this investigation whether JIBAR could have been manipulated. We found the South African Reserve Bank report on JIBAR to be unconvincing due to internal contradictions and the reliance on tests that are inadequate to identify manipulation. We found it impossible to test for the trading type of manipulation due to the necessary data not being publically available. We found no evidence of the day-of-the-month type of manipulation. We also found that the 3 month JIBAR behaved “normally” over the financial crisis period. But, the behaviour of the 1 month JIBAR over the crisis period was “abnormal” and is indicative of banks submitting too low JIBAR quotes to appear healthier.

There is a national drive to increase PhD production, yet we know little about how this imperative takes shape within different disciplines. We therefore set out to explore recent developments and the current status of the PhD in economics at four South African research-intensive universities. A data set of all economics PhDs produced in these commerce faculties during the period 2008–2014 was analysed to determine whether the departments of economics responded to the call for increased doctoral production, and the role the PhD by publication might have played in the process. How an increase in quantity might influence doctoral education in the respective academic departments was also considered by supplementing the quantitative data with perspectives from heads of department at the four institutions. The notable increase in doctoral production over the time period studied shows that national and international trends have influenced doctoral education in economics departments within...

Financial management: Turning theory into practice is an accessible and principles-based financial management textbook for undergraduate and Honours Accounting students. The book takes cognizance of changes in the economic environment and their implications for the role of financial management and the teaching of the subject. Financial management follows the SAICA syllabus for financial management but also takes the skills required by the CIMA syllabus into account. It acknowledges the intent behind the SAICA Competency Framework to develop problem-solving, critical thinking and ethical business leaders, but at the same time provides academic and financial literacy support to students. This guided approach serves to produce both technically competent students as well as students who will be capable financial leaders in the workplace. Financial management supports students in the following ways: - Opening case studies engage student interest and illustrate why the principles that wil...

1. Abstract Sharpe, Mackay, Rankin and Aling in ‗Are South Africa‘s CEO‘s overpaid‘ (2012) find that the chief executive officer (CEO) of Investec is the most overpaid CEO in South Africa. In the context of South Africa‘s income inequality and other social problems we investigated this claim by using a case study approach. We found that the Sharpe et al. (2012) approach did not accommodate individual company and sector circumstances and was thus too broad in scope to offer a definitive answer. We compared the remuneration of Investec‘s CEO with that of the other large South African banks and explained why an international comparison with peer companies is more appropriate. In addition we pointed out the problem with peer group comparisons, namely that it is unable to address the possibility that CEO‘s as a class are overpaid, and compared Investec‘s average executive director remuneration with that of the average employee. Our results indicate that compared to other companies the CE...

Purpose Accounting academics in the South African system understand their primary responsibility to be the teaching of prospective Chartered Accountants (CAs) rather than the advancement of knowledge through research. The purpose of this study is to determine what factors motivate accounting academics who are CAs to obtain doctorates in an environment dominated by the profession, where promotion is possible to Full Professor without a Doctorate but not without the professional qualification of CA. And did these doctoral CAs face challenges on their journey, such as resistance from colleagues? Design/methodology/approach A total of 22 academic CAs with doctorates and 18 academic CAs studying towards doctorates were surveyed to gain a deeper understanding of who they are, what their motivations were for undertaking the doctorate journey and what they experienced. Findings The main finding of this study is that the culture of accounting departments in South Africa is beginning to shift...

1 Prahalad, C.K. 2008. The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits. Pearson Education. The Centre for Affordable Housing Finance in Africa (CAHF) is a not-for-profit company with a vision for an enabled affordable housing finance system in countries throughout Africa, where governments, business, and advocates work together to provide a wide range of housing options accessible to all. CAHF’s mission is to make Africa’s housing finance markets work, with special attention on access to housing finance for the poor. We pursue this mission through the dissemination of research and market intelligence, supporting cross-sector collaborations and a marketbased approach. The overall goal of our work is to see an increase of investment in affordable housing and housing finance throughout Africa: more players and better products, with a specific focus on the poor. Case Study Series

Purpose: The National Credit Act, No. 34 of 2005, introduced debt counselling as a means to relieve consumer over-indebtedness in South Africa. This South African experience can inform the current regulatory interest in consumer protection within financial services. Why do many consumers who enter debt counselling subsequently fail to make the agreed payments as they enjoy legislated advantages under debt counselling? The consequential exit from debt counselling can ultimately lead to default on the underlying credit agreements and possible sequestration. Approach: Access to a large proprietary dataset allows this question to be answered. Expectations and techniques from consumer credit scoring were used to make sense of the data. Findings: Overall the results show that the behaviour of consumers under debt counselling is similar to consumer behaviour in consumer credit, yet more rational. South African consumers only persist with debt counselling whilst the benefits outweigh the costs indicating that debt counselling accomplished a partial transfer of power from financial institutions to consumers. Social implications: The results show that low-income consumers are not benefitting from debt counselling, in contrast to the aims of the National Credit Act, No. 34 of 2005. This is because they are not often taken on as clients by debt counselling firms and because low-income consumers rationally choose to withdraw from the debt counselling relationship by skipping payments. The results also show that the minority of a consumer’s credit agreements are included in their debt counselling arrangement. The evidence shows that consumers derive benefit from the lengthening of payment terms available under debt counselling. Limitations: Only data from a single debt counselling firm was considered and might not be representative of the entire population of debt counselled consumers. Variables related to exit from debt counselling could have been omitted from the regressions.