Change in corporate debt levels in South Africa from 1994 to 2016

Master Thesis


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University of Cape Town

This paper aims to investigate the change in corporate debt levels in South Africa from 1994 to 2016 as well as analyse certain factors that play a role in the decision making of corporates when it comes to the all important decision of capital structure. The study uses data from large capitalisation, retail and food producing firms listed on the Johannesburg Stock Exchange. Four different leverage measures are used to determine the change in capital structure over the period under review as well as six of the most common determinants of capital structure used in literature. The analysis shows that South African corporates have drastically increased their appetite for debt funding compared to equity funding over the last two decades. Large capitalisation stocks reflected the largest increase in the use of debt, whilst food producers showed the smallest yet still significant increase in debt. Analysis has also shown that firms have changed their maturity profile of their debt significantly since the 2008 financial crises. Results from the analysis on determinants varied with some determinants showing statistical significance.