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- Volume 4, Issue 2, 2011
Journal of Economic and Financial Sciences - Volume 4, Issue 2, 2011
Volume 4, Issue 2, 2011
Author Gideon ElsSource: Journal of Economic and Financial Sciences 4, pp 235 –236 (2011)More Less
Even though this issue of the Journal of Economic and Financial Sciences is numbered as the second issue of the fourth volume, this is actually the third issue this year after a special issue focussing on the field of competition economics was successfully published in August 2011. Another feather in this issue's cap is the fact that for the first time two articles in Afrikaans have been published. In line with the aim and the scope of the journal, various articles published have a very strong focus on an emerging market field.
Author Offiong H. SolomonSource: Journal of Economic and Financial Sciences 4, pp 237 –256 (2011)More Less
This paper adapts a dynamic real business cycle model to examine the effect of fiscal policy on the relative size of the informal sector in Nigeria. The motivation for this paper is to provide an economic intuition on how fiscal policy has contributed to the growth of the informal sector. The results of the model show the presence of an inverted U-shaped relationship between the tax rate and the size of the informal sector. It also predicts that for a given tax rate below a threshold of 30%, public capital stock contributes to an increase in the size of the informal sector and vice versa. The theoretical predictions of the model are supported empirically using data from Nigeria between 1980 and 2000. The model finally shows that there is a proportional relationship between the agent's welfare and the size of the informal sector.
Source: Journal of Economic and Financial Sciences 4, pp 257 –274 (2011)More Less
Even though the IFRS for SMEs does provide some relief in respect of the financial reporting burden for non-public entities, there still seems to be a need for an even lower level of financial reporting. In recent years South Africa embarked upon the development of a financial reporting framework for non-public entities and various versions of this so-called micro GAAP have been issued. However, the Accounting Practices Board raised some concerns about the then proposed micro GAAP. This article highlights the South African accounting practitioners' views from different professional bodies on micro GAAP. They generally believe that micro GAAP will represent fair presentation and that the financial statements prepared under micro GAAP can still be regarded as general purpose financial statements. Furthermore, the majority of accounting practitioners believe that there is a definite need for a third tier of financial reporting in South Africa and indicated their preference of which entities may apply micro GAAP. Legal backing of micro GAAP is also considered appropriate by the practitioners.
Source: Journal of Economic and Financial Sciences 4, pp 275 –300 (2011)More Less
This study focuses on alternative ways to measure financial sector development and the external factors that both directly and indirectly influence economic growth. The empirical results based upon panel data from 1985 to 2003 for a sample of emerging countries suggest three major conclusions. First, by including a range of alternative financial sector development measures and a variety of external policy-related factors in the model, the importance of supplying basic liquidity services, as measured by M3, becomes less important for emerging countries. Second, the empirical results suggest that while a basic level of deposit insurance protection might prove stabilizing for emerging economies, excessive levels of insurance may promote undue risk. Third, several competitive market structure and regulatory variables designed to measure efficiency in the intermediation process, such as net interest margin, and managerial efficiency as measured by overhead costs, are found to have a statistically significant, and in certain cases, unexpected impacts.
Spatial price transmission analysis in Ghanaian agricultural markets : does the data frequency improve our estimation?Author Joseph AmikuzunoSource: Journal of Economic and Financial Sciences 4, pp 301 –316 (2011)More Less
Unavailability of high frequency weekly or daily data compels most studies of price transmission in developing countries to use low frequency monthly data for their analyses. Analysing price dynamics, especially in agricultural markets, with monthly data may however yield imprecise price adjustment parameters and lead to wrong inferences on price dynamics. This is because agricultural markets in developing countries usually operate daily or weekly, not monthly, as implied by the market analysts who use low frequency data. This paper investigates the relevance of data frequency in price transmission analysis by using a standard and a threshold vector error correction model to estimate and compare price adjustment parameters for high frequency semi-weekly data and low frequency monthly data obtained from five major fresh tomato markets in Ghana. The results reveal that adjustment parameters estimated from the low frequency data are higher in all cases than those estimated from the high frequency data. There is reason to suspect that using low frequency data, as confirmed in some literature, leads to an overestimation of the price adjustment parameters. More research involving a large number of observations is however needed to enhance our knowledge about the usefulness of high frequency data in price transmission analysis.
Corporate governance practices at South African higher education institutions : an annual report disclosure analysisSource: Journal of Economic and Financial Sciences 4, pp 317 –332 (2011)More Less
Higher education institutions are presently facing many challenges, ranging from economic and financial constraints to social and educational issues. Accordingly, sound management and governance are essential, and this brings the governance model of HEIs more in line with business corporations. This article provides an overview of the state of governance practices at higher education institutions in South Africa, and an assessment of the corporate governance disclosures in their annual reports. This was done through a literature review of higher education developments, including a South African perspective, supported by empirical evidence obtained from assessing the annual reports of these institutions. The study found that, although most of these institutions are providing disclosure on their corporate governance structures and practices in line with the recommendations of the Higher Education Act and King II, such disclosure is often lacking in detail and could be improved.
Financial leverage decisions in an era of corporate earnings down-turn and financial market instability - the Nigerian experienceAuthor Abel E. EzeohaSource: Journal of Economic and Financial Sciences 4, pp 333 –350 (2011)More Less
This paper examines the impact of profitability on the financial leverage of firms operating in an unstable macroeconomic environment such as Nigeria. Using fixed and dynamic panel models, it finds consistent evidence that the profitability of a firm significantly and negatively affects its short-term debt, but not its long-term debt capital. It attributes this to the unstable nature of the Nigerian business environment and the relative inefficiency of its financial markets. It signals that Nigerian firms could be over-relying on short-term debt and external equity to fund long-term investments - a trend that is capable of increasing cost of capital to a level above any plausible limit.
The direction of possible causal relationship between financial development and economic growth in NamibiaSource: Journal of Economic and Financial Sciences 4, pp 351 –366 (2011)More Less
The study investigates the causal relationship between financial development and economic growth in Namibia. In order to test for the existence of long-run relationships between the variables, the study employs a cointegration and vector error correction model (VECM) technique. The Granger causality test was applied to the variables to test for the direction of causation between variables. The results show that there is a stable long-run relationship between financial development and economic growth. The Granger causality test indicates that the causality runs from economic growth to financial development. The results suggest that the real sector of the economy should be developed further in order to stimulate further development in the economy through policy interventions like industrial development to diversify the economic base, enhance the performance of small and medium enterprises, and improve the performance of the tourism sector, which has great potential for promoting growth.
Author Thea L. VoogtSource: Journal of Economic and Financial Sciences 4, pp 367 –390 (2011)More Less
Very little country-specific information is available on the effects of the global financial crisis on developing countries. This article focuses on the effects of the global financial crisis on the chief financial officers (CFOs) of the 40 largest listed companies on the JSE Ltd and achieves four objectives. Firstly, it provides perspectives on the effects of the global financial crisis on South Africa. Secondly, it details a literature review on the effects of the crisis on CFOs globally. Thereafter, a model is presented of the roles and responsibilities of CFOs, which, together with the literature review and previous similar research, was used as the basis for a questionnaire. Lastly, this article reports on the responses to the questionnaire. The research revealed eight significant findings and a number of specific areas for research. Among these significant findings were that respondents' perceptions of an increase in importance in some of their roles did not correspond to the time they spend and expect to spend on responsibilities related these roles. In addition, respondents expected to spend even less time on IT and sustainability. This article provides valuable insights into the extent of the effects of the global financial crisis on CFOs.
Source: Journal of Economic and Financial Sciences 4, pp 391 –406 (2011)More Less
In South Africa, there is still no clear policy of internationalisation of higher education, partly due to limited research. So far, only two efforts - at Nelson Mandela Metropolitan University (NMMU) in 2004 and Rhodes University in 2005 - have been made to determine the expenditure and foreign revenue impact of international students on South Africa. Each of these papers sampled only a single university, so they are of limited use for national impact analysis. To build on these studies, this research was conducted at six South African universities that admit the largest number of international students and also included the economic effects of spending items hitherto neglected. We show that international students (mainly from Africa) contribute significantly to South African GDP and balance of payments, but that South Africa still lags behind in exploiting and enhancing these benefits.
Die inkomstebelastinghantering van aanvangsfranchisefooie betaalbaar in die Suid-Afrikaanse petroleumbedryfAuthor Leonard C. WillemseSource: Journal of Economic and Financial Sciences 4, pp 407 –426 (2011)More Less
A wholesaler of petroleum products is prohibited in terms of section 12(2)(c) of Regulation 287 of the Petroleum Products Act, No. 120 of 1977, to own a retail licence for purposes other than that of training. As a result, petroleum companies make use of franchises to sell their products. The concept of a franchise is based on the principle that a franchisee obtains the franchise of an existing, often prosperous, business from a franchisor, and then operates the business under the banner of this franchise. The franchisee pays the franchisor franchise fees as consideration for certain items or privileges obtained. This article investigates the deductibility of franchise fees in terms of the current South African Income Tax Act, No. 58 of 1962 and includes an evaluation of Australian Income Tax Act sections that might offer deduction possibilities for franchise fees if applied within a South African context.
Author Lynette OlivierSource: Journal of Economic and Financial Sciences 4, pp 427 –432 (2011)More Less
The Tax Administration Bill (TAB) that will be tabled in parliament during this year will no doubt have a significant impact on the administration of all taxes. The drafting of the TAB was announced in the 2005 Budget Review as a project "to incorporate into one piece of legislation certain generic administrative provisions, which are currently duplicated in the different tax Acts". The scope of the project has since been extended so that it can now be seen as a preliminary step to the re-write of the Income Tax Act, 1962, since the administrative part of the Act comprises about 25% of the Act.
Author Suzanne KievietSource: Journal of Economic and Financial Sciences 4, pp 433 –448 (2011)More Less
The amounts set aside for the provision for employee-related contingent liabilities, such as the provision for leave pay, are often considerable. According to current Income Tax law, it is highly unlikely that the former employer (seller) will enjoy a tax deduction. Furthermore, it is also unlikely that the prospective employer (buyer) will enjoy a tax deduction. In contrast to this, both the former and prospective employers are held liable according to the Labour Relations Act in cases where a business is sold as a going concern. This article concludes that the Draft Taxation Laws Amendment Bill 2011, as envisioned, finally provides clear tax legislation, but still needs to be aligned with the objectives of the Labour Relations Act. In doing so, contradictory legislation will be avoided, thus facilitating the transfer of businesses and achieving the protection of employees' work security.