Browsing by Author "Botha, Derek"

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    A contingent claims analysis of the pricing of rights isssues with discontinuous diffusion processes
    (1998) Botha, Russel John; Botha, Derek
    This research proposed to identify the most accurate method of pricing rights using option pricing models, including the Black Scholes model, the Cox constant elasticity of variance model and the Merton jump diffusion model, and to determine the set of input parameters that lead to the most optimal results. The empirical results indicated that on average all of the models are able to estimate the actual rights trading prices relatively well. Some models performed better than others did and these findings were consistent with the original reasonings. The market was shown to not account for the effect of dilution. The best model prices were obtained when calculating volatility over a one year historical period that included the actual rights trading period. The hypothesis regarding trading volume showed that there is a significant impact of trading volume on the estimation of accurate option prices. The filter rule of rejecting rights prices below 10 cents and 100 cents also improved the results thus showing a bias for lower priced rights to be incorrectly valued and possibly some inefficiency in this sector of the market.
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    A group income tax system for South Africa
    (1997) Mahuma, Keaobaka Percival; Botha, Derek; Haupt, Phillip
    This thesis establishes a group income tax system for South Africa so that equity may be achieved between the burden of company income tax borne by shareholders who invest in companies that are structured through subsidiaries and shareholders that invest in companies that are structured through divisions. For example, intercompany profits and losses of a revenue nature are subject to income tax whereas interdivisional profits or losses of a revenue nature are not subject to income tax. Also, tax losses incurred by a company are not deductible from taxable income of other companies within the same group whereas in the case of a company that is structured through divisions losses incurred by a division are deductible from income of other divisions of the same company. The study is classified as 'microcomparison' whereby legal problems that exist in one country are studied on a comparative legal basis. Accordingly, the objective of the thesis is achieved by undertaking a comparative study of group income tax law in the United Kingdom and United States of America for equitable group income tax treatment of problems that exist within the current South African company income tax system. First, the definition of 'a group' is established, after which a group income tax treatment of group transactions and tax losses is established to eliminate the inequities that are inherent in the South African income tax system. Throughout the study it is demonstrated that these inequities exist in spite of the current income tax avoidance provisions (for example s103 and the connected persons rules). The conclusions made in the study indicate that the inequity that exists in the South African company income tax system should be eliminated.
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    The impact on share prices of reporting financial targets and constraints
    (1991) Maguire, William Alexander Arthurs; Affleck-Graves , J F; Botha, Derek
    This thesis examines the impact on share prices of voluntary reporting of financial targets and constraints, particularly the target rate of return, target dividend payout ratio and target debt ratio. Hypotheses developed about of this reporting are that a positive impact on in estimation risk the potential share price impact there will be share prices through a reduction an increase in the dispersion of share price changes owing to a revision of expectations a positive impact on share prices owing to a signalling effect. The hypotheses are tested by examining share price behaviour accompanying the voluntary reporting of financial targets and constraints over the period 1974 to 1982 by thirty-four companies listed on the Johannesburg Stock Exchange. This is an event study, in which the event is defined as the first occasion on which a company reports the specified financial targets and constraints. To test for a positive impact on share prices, weekly excess returns are calculated using the market model. To test for an increase in the dispersion of share price changes, weekly variability ratios are calculated which provide a measure of returns in the event week relative to the average variability of returns in the estimation period. The controls applied in this study to demonstrate the link between the event and the share price impact are the market model, diversification of calendar dates and two control groups. The results of the study reveal a positive impact on share prices when companies first report financial targets and constraints. This is consistent with all three hypotheses. As this form of voluntary reporting has not previously been tested in this way, the results should be of interest to financial managers and to those concerned with the regulation of financial reporting in South Africa.