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- Volume 6, Issue 3, 2013
Journal of Economic and Financial Sciences - Volume 6, Issue 3, 2013
Volume 6, Issue 3, 2013
Author Samuel BradleySource: Journal of Economic and Financial Sciences 6, pp 539 –564 (2013)More Less
The goal of this research was to determine, in a South African context, whether there is any correlation between chief executive officer compensation and the performance of the company. For the purposes of the research, the compensation of chief executive officers was broken down into three components: salary, bonus and 'other' remuneration, while company performance was measured on return on equity, return on assets and earnings per share figures. Data in respect of the forty largest listed companies in South Africa were collected over a period of five years. The results of this study indicate that there is no linear relationship between chief executive officer compensation and company performance variables. The econometric models did, however, show correlations between certain variables, taking into account the other predictor variables in the model. Evidence of correlations between age, experience and compensation was also found.
Source: Journal of Economic and Financial Sciences 6, pp 565 –592 (2013)More Less
Value-added tax implications of client loyalty program transactions.
Client loyalty programmes are a common phenomenon in the South African market. Despite the fact that client loyalty programmes have been prevalent in South Africa since the 1980s, the South African Revenue Service has issued minimal guidance on the value-added tax treatment of client loyalty programme transactions. The main objective of the research was to determine whether South African client loyalty programme suppliers correctly account for client loyalty programme transactions for value-added tax purposes. In order to meet this objective, available local literature was analysed to determine the proposed value-added tax treatment of a client loyalty programme transaction. The proposed correct value-added tax treatment was compared with a survey circulated to a population of client loyalty programme suppliers in South Africa. The comparison indicated that in practice the Value-Added Tax Act 89 of 1991 is not always interpreted correctly. This incorrect tax treatment could result in financial loss to the client loyalty programme supplier as taxpayer.
Author Elmarie PapageorgiouSource: Journal of Economic and Financial Sciences 6, pp 593 –610 (2013)More Less
Organisations are constantly striving to maximise shareholder wealth by improving the effectiveness and efficiency of operations. Since the early 1980s, there has been an emerging trend to outsource functions considered to be non-core. These trends have now moved into the internal audit sphere, a function that was previously maintained in-house. Using survey data collected from organisations in the South African private and public sectors, the degree of internal audit outsourcing, the rationale behind organisations' outsourcing decisions, the types of internal audit services provider, the perceived status of in-house internal auditing and perceptions of independence of outsourced internal audit functions were determined. It was noteworthy that no significant differences were observed between sectors with regard to interaction with external auditors and threats to independence. The biggest difference appears to be that private companies chose a "Big 4" accounting firm more often than the government sector did. This study contributes to the existing body of knowledge and bridges the gap between theory and practice by highlighting the impact that the decision to outsource has had on the South African internal audit function.
The potential financial upliftment of inner-city street traders through the provision of rental standsSource: Journal of Economic and Financial Sciences 6, pp 611 –630 (2013)More Less
Historically, policy applied to the informal sector in the Southern African context has been either (i) 'restrictive', or aimed at the elimination or eradication of the sector; or has been (ii) 'promotive', or aimed at the financial upliftment of certain informal participants in order to enable the potential for economic developmental inherent in the sector. This research provides evidence of the financial impact of one such 'promotive' intervention: the provision of street-trader rental stands by local government. Using survey data from 2008, 2009, and 2010, an exploratory parametric research design is applied, using t-tests, Pearson point biserial tests, partial correlation analysis, chi-squared tests and multiple linear regression. Results suggest that the provision of rental stands can (i) significantly reduce gender inequality in earnings; enable traders (ii) to work more hours a day; (iii) to offer more capital-intensive product offerings; and (iv) to obtain higher gross daily earnings.
Source: Journal of Economic and Financial Sciences 6, pp 631 –644 (2013)More Less
Tourism is an engine of growth and development in natural areas, but resources need to be protected and that often involves high costs. The opportunity to view Big Five game in their natural habitat is a common good and it is difficult to determine tourists' valuation of the Big Five species and their willingness to pay for their conservation. This exploratory study surveyed tourists visiting the Kruger National Park and asked them about their willingness to pay. The objective is to identify the characteristics of those visitors who will pay to view Big Five game in their natural habitat. The study found that visitors to the Kruger National Park assigned a significant amount (34.64%) of total average spending to the opportunity to view the Big Five in the Kruger National Park. The correlates of willingness to pay for conservation include age, marital status and the importance of the Big Five in the decision to visit the Park.
Author Laurine ChikokoSource: Journal of Economic and Financial Sciences 6, pp 645 –660 (2013)More Less
This article analyses the competitiveness of Zimbabwe's exports in the South African market under the multiple currency system from 2009 to 2011. Using real exchange rate analysis and the Revealed Symmetric Comparative Advantage index (RSCA), the article confirms that Zimbabwean products have lost competitiveness in South Africa, with comparative advantage only remaining in a narrow range of primary products. Based on the results, we recommend that deliberate policies be instituted to diversify and enhance the competitiveness of Zimbabwe's exports.
Source: Journal of Economic and Financial Sciences 6, pp 661 –682 (2013)More Less
This study uses a sample of 49 manufacturing, 24 mining and 23 retail firms listed on the Johannesburg Stock Exchange during the period 2005-2010 to investigate the relationship between leverage and the firm's key financial performance variables. Leverage is directly proportional to cash flow. This is consistent with the trade-off (TO) and agency theories. Capital expenditure is positively correlated to leverage, while asset tangibility and retention rate are negatively correlated to leverage. These findings confirm the validity of the pecking order theory. Liquidity and financial distress are negatively correlated to leverage. Consistently with the TO theory, leverage increases with profitability. Share price is positively correlated to leverage and this finding validates the market timing theory. The economic value added (EVA) is positively correlated to leverage and this finding rejects the TO theory. The true speed of adjustment for the sample is 64.20% for book-to-debt ratio and 28.11% for market-to-debt ratio.
Source: Journal of Economic and Financial Sciences 6, pp 683 –706 (2013)More Less
This paper models tourism demand for South Africa from the UK and the USA, using an almost ideal demand system. An error-correction almost ideal demand system (EC-AIDS) is applied to quantify the responsiveness of UK and USA tourism demand for South Africa, relative to changes in tourism prices and expenditure or income. Short-term own-price, cross-price and expenditure elasticities are derived from the EC-AIDS models. One of the key findings of the paper is that tourism from the UK and USA is not sensitive to price changes in South Africa in the short term. Tourism to South Africa is found to be more income-elastic than price-elastic, indicating that the country is vulnerable to changing world economic conditions. Even though price competitiveness does not yet seem to be a key concern, significant substitution effects are present, with especially Spain and Malaysia benefiting from a decline in South Africa's price competitiveness.
Source: Journal of Economic and Financial Sciences 6, pp 707 –730 (2013)More Less
The study examined the assumption that 'size matters' in the empirical controversy of the relationship between migrants' remittances and economic growth. This is done through an empirical analysis of the remittances-growth relationships in selected countries in Sub-Saharan Africa, where remittance inflows are overwhelming proportions of real GDP. The study used data at the country level, for five countries: Cape Verde, Lesotho, Nigeria, Senegal and Togo. The long-run ARDL estimates indicate positive and significant effects of migrants' remittances on growth performance in Cape Verde and Nigeria, but negative, and slightly significant effects for Lesotho, with no evidence of long-run level relationships between remittances and economic growth in Senegal and Togo. Thus, the assumption that size may matter in the remittance-growth nexus finds no support, as findings provide no significant departure from the existing inconclusiveness of empirical literature on the relationship. For policy, the study advocates country-level policies that improve the efficiency of remittance inflows and promote the use of remittances for developmental purposes.
Source: Journal of Economic and Financial Sciences 6, pp 729 –760 (2013)More Less
A significant correlation exists between financial crises and bank liquidity problems, thus exposing the investor to increased risk where the banking industry forms part of their investment portfolios. Also, due to more volatile markets and more complex financing banking activities, the general notion of evaluating only share price trends to determine future investment prospects can become misleading. This paper, therefore, focuses on a multi-stage Data Envelopment Analysis (DEA) model as a complementary share performance tool to the traditional set of fundamental factors. When combining the results from the DEA model and a set of traditional financial measures, Nedbank and FirstRand were found to be the more sensible investment choices for the period under investigation.
The positive labour productivity externalities that arise from a post-secondary qualification or trainingAuthor Hardus Van ZylSource: Journal of Economic and Financial Sciences 6, pp 761 –772 (2013)More Less
The aim of this article is to estimate, compute and determine the magnitude of positive labour productivity externalities (defined as unintentional positive labour productivity spill-over effects) generated by employees with a post-secondary education or training (post-grade 12). The research is deemed necessary given the important debate on the shortage of higher-skilled employees and the impact of this on the creation of positive labour productivity spill-over effects in the workplace. Logarithm wage equations for different skill levels and for different geographical areas are derived and estimated in order to determine the existence and magnitude of positive labour productivity externalities created by employees with a post-secondary qualification or training. Higher-skilled employees who have a post-secondary qualification or training and who are employed in a geographical area in which post-secondary education or training institutions are denser tend to create significant positive productivity externalities in the workplace.
Source: Journal of Economic and Financial Sciences 6, pp 773 –794 (2013)More Less
In this study, the relationship between movements in the exchange rates of five commodity currencies (Australia, Canada, Chile, China, and South Africa) in terms of the United States Dollar (USD) and the spot USD copper price was analysed. Correlation and regression analysis (including the use of lagged variables) was used to investigate these relationships. It was found that four of the five commodity currency exchange rates have a strong co-movement relationship with copper price (i.e. the Australian Dollar, Canadian Dollar, Chilean Peso, and the South African Rand). The only exchange rate that does not have a co-movement relationship with copper prices is the Chinese Yuan. This article is based on a master's minor dissertation study.
Source: Journal of Economic and Financial Sciences 6, pp 795 –814 (2013)More Less
Client loyalty programmes have been prevalent in South Africa since the 1980s, but the popularity of these programmes has increased drastically over the past few years, with more than 100 suppliers in South Africa currently making use of them. On 1 July 2007 the IASB issued IFRIC 13 to give specific guidance to suppliers on the accounting treatment of client loyalty programme transactions. The IASB is currently compiling a new revenue standard. This single new revenue standard will replace six existing standards or interpretations, including IFRIC 13. A critical analysis of IFRIC 13 will assist the development of this new revenue standard. The main objective of the research was therefore to determine whether the guidance in IFRIC 13 regarding the accounting treatment of a single-company client loyalty programme transaction is consistent with other accounting standards and recent developments. The accounting treatment of each component of a client loyalty programme transaction with a change in estimate was considered. It was found that inconsistencies exist in the initial measurement of the fair value and how a change in accounting estimate is recognised.