Browsing by Author "De Jesus, Carlos"

Now showing 1 - 12 of 12
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    Active bear, passive bull: a comparative analysis of active and passive investing during and bear market runs in South Africa
    (2025) Naicker, Dylan; De Jesus, Carlos
    Purpose: This dissertation aims to evaluate whether actively managed portfolios achieve greater returns than passively managed portfolios. Previous studies relating to active versus passive investing have had mixed results. This study builds on the limitations of earlier studies by extending the time frame and eliminating survivorship bias. In addition, the analysis evaluated the South African markets' level of information efficiency using the efficient market hypothesis. Methodology: The portfolios used within the study are self-derived, and the weightings are rebalanced to allow new entrants to enter the market. This study will make use of a unit trust portfolio as the proxy for active investing and the portfolio of ETFs as the proxy for passive investing. Bull and bear markets were used in this study to determine distinct market conditions to measure the performance of the portfolios in different conditions. Bull and Bear markets are determined by comparing one standard deviation above and below the average market return using the CAPM model. The identified unit trust was further divided into its investing strategy (Value or non-Value investing strategies) and tested against the ETF portfolio to determine which investing strategy performs better. F-tests, t-tests and the Sharpe ratio was then used to analyse the returns of the portfolios during the identified market periods. Findings: It was found that during both market periods, the actively managed portfolio outperformed the passively managed portfolio, which is contrary to the findings of prior literature. These findings highlight that the South African market is weak and inefficient according to the efficient market hypothesis. Originality: This study built on the limitations of previous studies by first examining the portfolios over a more extended period to eliminate the shortcomings of previous research. This study offers an additional outlook into the performance of unit trusts by classifying them according to their investing nature, comprised of Value and non-Value funds, which will assist academics for further research and investors within the unit trust market.
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    Are the capital structures of JSE listed companies influenced by equity market timing?
    (2024) Mpeke, Siyanda; De Jesus, Carlos
    Purpose Empirical research on capital structure in the South African context has primarily been focused on testing the speed of adjustment theory, pecking order theory and the trade-off theory. This dissertation sets out to test whether evidence of the market timing theory exists in JSE listed firms by applying the method used by De Bie and De Haan (2007) for evidence of market timing in Dutch firms; the regression model used to test market timing was developed by Baker and Wurgler (2002). Baker and Wurgler (2002) hypothesized that a firm's current capital structure is the cumulative result of past attempts to issue equity when share prices are high and repurchase equity when share prices are low; this is the market timing theory of capital structure. Design/methodology The method is applied to non-financial firms for the ten-year period including financial periods from 2012 to 2022. Specifically addressing the following question, is the current capital structure of JSE firms the cumulative result of past equity timing attempts? To test this hypothesis, the regression model which includes the externalfinance-weighted average market-to-book ratio (EFWAMB) variable will be used alongside the four common variables for capital structure, namely: firm size, tangibility, profitability, and market-to-book ratio (Allini et al., 2018; Baker & Wurgler, 2002; De Bie & De Haan, 2007; Hovakimian, 2006). The study applies a two-step system generalised method of moments (GMM). For robustness, a Generalized Least Square regression (GLS) was also conducted for robustness as well as descriptive statistics and the discussion of the results thereof. Findings The results show evidence for both the pecking order theory and trade-off theory. More importantly, the findings of this dissertation show evidence supporting the market timing theory of capital structure. Originality/value The market timing theory has become popular and has been tested in other markets (Hovakimian et al., 2004), however it has not been explicitly tested in South African firms. Adding the South African context further contributes to the capital structure literature and further tests the robustness of the theory or can help in identifying the circumstances in which the results of the study may differ
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    Are there benefits to diversification across the largest African stock markets?
    (2016) De Jesus, Carlos; De Jager, Phillip
    This study examines the co-movements of selected African stock exchanges, including Nigeria, Morocco, Egypt and South Africa, as well as the USA, in local currency and in USDt erms, for the period January 2004 to June 2014. The study sheds light on African market cointegration before, during, and post the financial crises of 2007/2008 to identify whether there are benefits to diversification in stock exchanges across Africa and how this has changed over time. Only the four biggest exchanges are examined, to eliminate the effects of illiquidity and ensuring the size of indices used result in conclusions that are practical to investors. This study looks at short and long term relationships using correlation, cointegration, and the direction of the relationships using causality tests. It finds low correlations between all African exchanges and the USA, with the exception of South Africa, which did show significant correlation with the USA. We find no consistent cointegration relationships over the periods tested. There are no consistent causality relationships between the various countries. The implication of these results are that there are likely benefits to diversification across the four African exchanges examined.
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    Capital structure and company performance: Did the COVID-19 pandemic matter?
    (2025) Ganesh, Shivaal; De Jesus, Carlos
    PURPOSE The aim of this study is to measure the significance of the relationship between leverage and the financial performance of 137 non-financial companies from 2016 to 2023. This study also aims to draw comparisons between this relationship during the pre-COVID-19 Pandemic of 2016 to 2019, over the full period of 2016 to 2023, and post the start of the COVID-19 Pandemic, 2020 to 2023. METHODOLOGY A two-step least squares Generalised Method of Moments panel regression model using a forward orthogonal deviation to measure the significance of the relationship was utilised. This was accompanied by model robustness checks: Breusch-Godfrey Pagan, Lagrange-Multiplier, Durbin-Watson and Arellano and Bond Serial Correlation tests. FINDINGS This study identified multiple negative relationships that were statistically significant across the periods that were analysed. This includes total liabilities and return on equity (ROE) for the pre-COVID-19, COVID-19, and full periods. Non-current liabilities and ROE in the pandemic and full periods but not in the pre-pandemic periods. Current Liabilities and ROE for the pre-COVID-19 period and full period but were insignificant for the COVID-19 period. Total liabilities and return on assets (ROA) were found for the full period, but insignificant for the pre-COVID-19 and COVID-19 periods. Non current liabilities and ROA for the pre-COVID-19, COVID-19 and full periods. Current liabilities did not exhibit any statistically significant relationships with ROA for all three periods. From the findings of this study, we can conclude that companies should exercise caution when deciding to utilise leverage during crisis and non-crisis periods as it can harm financial performance. It therefore highlights the importance of financing strategies during periods of low economic activity. ORIGINALITY This study provides new evidence on the relationship between leverage and financial performance from a South African context. Additionally, it compares the relationships between the COVID-19 Pandemic and pre-COVID-19 periods, determining if the pandemic had any impact on the relationship. Three leverage variables are used: total, non-current- and current liabilities to evaluate the relationship of each type of leverage measure with financial performance.
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    Exploring how South African business incubators assist entrepreneurs in accessing venture capital
    (2025) Green, Allistair; De Jesus, Carlos
    Context: Venture Capitalists (VCs) specialise in providing capital to new businesses with a short track record; however, new South African businesses still face high failure rates due to a lack of funding and insufficient entrepreneurial skills. Business incubators (BIs) aim to bridge this gap by providing support and resources to entrepreneurs to start and manage new businesses and access to capital, including venture capital. Purpose: This study assesses how South African BIs support entrepreneurs in preparing for venture capital funding. Research Design: The study is an exploratory qualitative study and employs an engaged scholarship approach and entrepreneurial ecosystem theory. Primary data was collected through semi-structured interviews, supplemented by a questionnaire with three key stakeholders: BIs, VCs, and entrepreneurs. Thematic analysis was used to identify key themes and insights. Main findings: BIs can significantly impact entrepreneurs' ability to secure venture capital by providing tailored support and networking opportunities. Stifling this impact is the expectation gap between BIs and VCs, BI management expertise, insufficient quality entrepreneurs, and government policies that are mute on early-stage funding. Contribution: The research builds on existing literature and highlights BIs' critical role in the South African entrepreneurial ecosystem. It also provides insights to BIs and the government to aid the creation of a thriving entrepreneur ecosystem bolstered by increased VC participation. Recommendations and Implications: The BI-VC relationship should be strengthened and communication enhanced. BI management should actively increase their entrepreneurial expertise and skills while building programs that effectively enhance entrepreneurial skill development. The government should increase effective policies that create an environment for early-stage capital to thrive. Improving entrepreneur support can lead to higher new business success rates, contributing to economic growth and job creation in South Africa. Research limitations: The study's population was limited to the Western Cape, although some participants are involved in their role (entrepreneur, BI, or VC) throughout the country and some throughout Africa. Originality: This study uniquely explores the intersection of South African BIs and VCs to increase entrepreneurial success through improved BI support mechanisms. Adding to previous BI literature by including the VC and entrepreneur perspective, supplementing interviews with a questionnaire to corroborate results, grounding the study on a theoretical framework and collaborating with practitioners using the engaged scholarship approach, determining whether any changes occurred since previous studies, and exploring the industry for new success factors.
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    Internally generated intangible assets the vaccine for UK listed finance industry financial contagion?
    (2025) Louw, Gerhard; De Jesus, Carlos
    Context: Internally generated non-capitalised intangible assets (IGNIAs) are not included in companies' balance sheets per international accounting standards, as they do not contribute to providing firms with resilience during crises. However, some companies gain a competitive advantage by continuously investing in IGNIAs , which management and investors should prioritize to foster resilience during unforeseen crises. Purpose: This study aims to determine whether investment in IGNIAs provided resilience, proxied by Return on Assets (ROA), during the COVID-19 crisis for 257 UK- listed finance firms from 2016-2023. The focus is on the UK finance industry due to its significant role in global financial contagion during crises. Research Design: This study used quantitative methods, employing firm-specific variables to test the hypotheses developed from existing theories. A longitudinal design was used with cross-sectional data from various firms in the finance industry. The study reviewed the relationship between UK finance firms' investment in IGNIAs and their resilience. It compared the resilience of firms that invested more in IGNIAs before the COVID-19 crisis to those that invested less, to determine if these assets contributed to their resilience. Main Findings: The study did not find a statistically significant relationship between investment in IGNIAs and resilience measured by ROA for the entire sample of 257 UK finance firms from 2016-2023. However, a somewhat statistically significant relationship was found between IGNIAs and resilience in the financial services industry only after the COVID-19 pandemic period, 2020-2023. Contribution: This study provides insights into the importance of IGNIAs in fostering resilience, especially for the finance industry, and contributes to the ongoing debate on whether these intangible assets should be included in firms' balance sheets. It highlights the need for industry-specific measures to resolve the contentious issue of capitalising IGNIAs.Recommendations and Implications: Management should prioritise continuous investment in IGNIAs to foster resilience and provide protection against unforeseen market crises. Standard-setting bodies should reconsider disclosing IGNIAs, as they are important factors for investors to consider when making informed investment decisions.
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    Market integration between cryptocurrency and technology indices
    (2024) Walker, Evan; De Jesus, Carlos
    This study investigates the relationship between cryptocurrency and semiconductor/technology indices for the period 2018(Q2) to 2023(Q2). The relationship was explored through use of correlation, Johansen cointegration, and Granger pairwise causality testing. The findings are key for determining the diversification benefits of cryptocurrencies and further examining the direction of causal relationships. The correlation results indicated weak to moderate correlation between cryptocurrencies and equity indices. The findings indicated that cryptocurrencies are cointegrated among each other and a bilateral causal relationship is present. Cointegration was found between cryptocurrencies and the Philadelphia Stock Exchange Semiconductor index, NASDAQ, S&P500, and Dow Jones. The NASDAQ, S&P500 and Dow Jones were found to cause crypto prices movements, but the reverse was true – for the latter two – when Binance was removed from the index. These findings suggest a lack of diversification benefits of cryptocurrencies compared to the semiconductor/technology sector. Investors should be careful when including cryptocurrencies into their portfolios as to not overexpose themselves to risk pervasive in both markets.
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    MARKET INTEGRATION BETWEEN CRYPTOCURRENCY AND TECHNOLOGY INDICES
    (2023-12) Walker, Evan; De Jesus, Carlos
    This study investigates the relationship between cryptocurrency and semiconductor/technology indices for the period 2018(Q2) to 2023(Q2). The relationship was explored through use of correlation, Johansen cointegration, and Granger pairwise causality testing. The findings are key for determining the diversification benefits of cryptocurrencies and further examining the direction of causal relationships. The correlation results indicated weak to moderate correlation between cryptocurrencies and equity indices. The findings indicated that cryptocurrencies are cointegrated among each other and a bilateral causal relationship is present. Cointegration was found between cryptocurrencies and the Philadelphia Stock Exchange Semiconductor index, NASDAQ, S&P500, and Dow Jones. The NASDAQ, S&P500 and Dow Jones were found to cause crypto prices movements, but the reverse was true – for the latter two – when Binance was removed from the index. These findings suggest a lack of diversification benefits of cryptocurrencies compared to the semiconductor/technology sector. Investors should be careful when including cryptocurrencies into their portfolios as to not overexpose themselves to risk pervasive in both markets.
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    Sector growth and related index returns – an integration analysis of the group of seven
    (2019) Mohamed,Taariq; De Jesus, Carlos
    This study examines the lagged short run and long-term relationships between output growth and related index returns of the industrial and financial sectors of the G-7 economies. This study examines this relationship using quarterly data for a maximum time period of 22 years ranging from 1994(Q4) to 2017(Q4). The relationship between sector specific output growth and related index returns of the G-7 is investigated within this study, in order to determine whether passive investors should incorporate expected growth prospects into their decision making in order to earn superior returns. In order to examine the relationship between sector specific output growth and the related index returns of the G-7, this study uses correlation, cointegration as well as causality testing. This study finds weak non-lagged correlation relationships between output growth and related index returns of the industrial and financial sectors of the G-7 economies, with the correlation relationships becoming stronger in all cases when lags are incorporated within the correlations analysis. This study also finds cointegrating relationships between financial sector output growth and related index returns of Italy and the United Kingdom and that financial index return data of the United Kingdom serves as a leading indicator for financial sector growth within the United Kingdom. The overall Implication of these results is that investors should not incorporate growth prospects into their decision making of which passive funds to invest in, of which these passive funds examined track the performance of industrial and the financial firms within the G-7 economies.
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    The impact of COVID-19 on earnings management: evidence from South Africa
    (2025) Mpumpula, Asanda; De Jesus, Carlos
    This study aims to determine whether the COVID-19 pandemic impacted the earnings management practices of South African firms and various industries by assessing the quality of total accruals. The study used discretionary accruals as a proxy for the magnitude of earnings management activities, estimated using the Modified Jones Model adapted by Kothari et al. (2005). 2016 to 2019 was deemed the pre-crisis period, while 2020 to 2022 was deemed the crisis period. The discretionary accruals of a sample of 159 Johannesburg Stock Exchange-listed firms were observed to determine the impact of COVID-19 on earnings management. Further, due to how different the impact of COVID-19 and the lockdown protocols were on the various industries, earnings management practices across the industries were observed. The findings suggest that COVID-19 had a significant impact on earnings management. Firms were found to engage in income- decreasing discretionary accruals during the crises. Further, the industry analysis suggests that the impact of COVID-19 on the industries observed was not symmetrical. A statistically significant increase in income-decreasing discretionary accruals was observed in basic metals, consumer discretionary and the technology industry. Consumer staples, health care and the telecommunications industry that were deemed to provide essential services during the pandemic were found to have increased their discretionary accruals and utilised income-decreasing accruals; however, the difference between pre- crisis and crisis-period discretionary accruals is not statistically significant. The study results also found that the energy and industrials industry decreased their discretionary accruals and improved the quality of accruals reported during the pandemic. This study adds to the limited research on earnings management in South Africa, an emerging market with characteristics of a developed country. This study may be useful for standard setters in their mandate to improve reporting standards and thus the quality of financial reports, investors seeking to value companies accurately, and regulators of financial statements concerned with the quality of financial reports in South Africa, such as the JSE and the South African Institute of Chartered Accountants.
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    The low-risk anomaly, cost of capital and IFRS 9 implementation impact: An analysis of South African banks
    (2023) Nicolson, Duncan; De Jesus, Carlos
    Purpose This dissertation investigates the impact of IFRS 9 implementation on capital ratios and the cost of capital of listed South African banks. In order to investigate this impact, the presence of the low-risk anomaly had to be determined for South African banks. Methodology This dissertation adapts a methodology that has been used to calculate the change in the cost of capital by both Baker & Wurgler (2015) and Fatouh et al. (2020). It is a modified version of CAPM and the weighted cost of capital which includes an error term for the low-risk anomaly. Findings The presence of the low-risk anomaly was discovered in the South African banking equity market. This in combination with a reduction in regulatory capital due to increased credit loss provisions, led to an increase in the cost of capital of South African banks. Practical implications This dissertation helps to add to the growing body of literature around the presence of the low-risk anomaly in South Africa. It also provides an assessment of the impact of the implementation of IFRS 9 on banks that regulators can use to gauge future implementations of regulatory and accounting standards. Investors can also take advantage of the low-risk anomaly and “bet against the beta” to gain additional returns as compared to high-risk portfolios. Value-add New accounting standards are implemented to improve decision-useful information for investors. This dissertation observes the unintended effects of accounting standard implementation on the banking industry in a developing market. The dissertation uses the initial results of IFRS 9 implementation to measure the impact of the accounting standard on banks' regulatory capital and cost of capital.
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    Why do South Africans use stokvels and what are the barriers that prevent participation in the formal financial sector?
    (2019) Gwamanda, Mbali; De Jesus, Carlos; Rajartnam, Kanshukan
    Two and a half billion of the world’s working adults are excluded from financial services. The exclusion of people from the formal financial sector has led to the growth of microfinance globally. The importance of financial inclusion is represented through the Sustainable Development Goals in which financial inclusion is an enabler in seven of the 17 goals. In South Africa, stokvels are one of the most important microfinance phenomena, as 11.5-million people are part of a stokvel. The formal financial sector in South Africa has started to target stokvel members through various stokvel accounts and products. Previous literature on stokvels focuses on the demography of stokvels; the features of stokvels; and the history of stokvels. Previous studies have found that the formal sector does not understand stokvel clientele. However, the review of the literature indicates that there is an insufficient analysis of the needs of stokvel members and the how the formal sector can better accommodate their needs. Therefore, this study will explore why South Africans continue to use stokvels and what barriers prevent stokvel members from participating in the formal financial sector. Recommendations will be made to various stakeholder based on the themes identified. This study found that the stokvel members perceived there to be information asymmetry, which they believe is then exploited by the banks. As a result, there is distrust in the formal financial system. Moreover, this study also found that the social interactions in stokvels are changing due to technology. The findings and recommendations in this study can be used by banks and other formal financial institutions to improve the suitability of their product and services. Consequently, financial inclusion will improve as the products and services provided by the formal sector will be better suited to the needs of stokvel members. This study will also provide insights for the South African government, community leaders and The National Stokvel Association of South Africa (NASASA).