Do fair adjustments influence dividend policy for South African firms?

dc.contributor.advisorDe Jager, Phillipen_ZA
dc.contributor.authorGrimmer, Brianen_ZA
dc.date.accessioned2017-01-30T10:53:54Z
dc.date.available2017-01-30T10:53:54Z
dc.date.issued2016en_ZA
dc.description.abstractThis paper investigates the potential procyclical effects of fair value accounting (FVA). If FVA adjustments result in increased accounting profits with the recognition of transitory gains through a firm's profit and loss (P&L), and if management incorrectly assesses the persistence of the unrealised gains, these increased profits may be paid out as dividends. This has the potential to increase leverage and risk for these firms, thereby also possibly amplifying economic cycles. A study by Goncharov and Van Triest (2011:59) on Russian firms found that FVA adjustments are persistent in future earnings; however, no empirical evidence was found to support an increase in dividends in response to unrealised FVA gains. By contrast, when the setting is limited to South African banks only, De Jager (2015:157) found that South African banks have paid the full amount of any unrealised transitory gains as dividends. This study focuses on the effects of FVA adjustments on dividend policy for South African firms, as represented by the firms included in the FTSE/JSE Top 40 Index. This furthers De Jager's (2015) study by extending the investigation of the dividend relevance of FVA adjustments from the major South African banks, to South African large firms in general. The results of a panel regression of the net profit of these firms reveal that unrealised FVA adjustments do have a persistent influence on future earnings, indicating that these adjustments contain both transitory and persistent elements. A further panel regression of the annual dividends declared by these firms indicates that dividend payments do include a portion of unrealised FVA gains, as expected by the persistent nature of a portion of these unrealised FVA gains.en_ZA
dc.identifier.apacitationGrimmer, B. (2016). <i>Do fair adjustments influence dividend policy for South African firms?</i>. (Thesis). University of Cape Town ,Faculty of Commerce ,Department of Finance and Tax. Retrieved from http://hdl.handle.net/11427/23725en_ZA
dc.identifier.chicagocitationGrimmer, Brian. <i>"Do fair adjustments influence dividend policy for South African firms?."</i> Thesis., University of Cape Town ,Faculty of Commerce ,Department of Finance and Tax, 2016. http://hdl.handle.net/11427/23725en_ZA
dc.identifier.citationGrimmer, B. 2016. Do fair adjustments influence dividend policy for South African firms?. University of Cape Town.en_ZA
dc.identifier.ris TY - Thesis / Dissertation AU - Grimmer, Brian AB - This paper investigates the potential procyclical effects of fair value accounting (FVA). If FVA adjustments result in increased accounting profits with the recognition of transitory gains through a firm's profit and loss (P&L), and if management incorrectly assesses the persistence of the unrealised gains, these increased profits may be paid out as dividends. This has the potential to increase leverage and risk for these firms, thereby also possibly amplifying economic cycles. A study by Goncharov and Van Triest (2011:59) on Russian firms found that FVA adjustments are persistent in future earnings; however, no empirical evidence was found to support an increase in dividends in response to unrealised FVA gains. By contrast, when the setting is limited to South African banks only, De Jager (2015:157) found that South African banks have paid the full amount of any unrealised transitory gains as dividends. This study focuses on the effects of FVA adjustments on dividend policy for South African firms, as represented by the firms included in the FTSE/JSE Top 40 Index. This furthers De Jager's (2015) study by extending the investigation of the dividend relevance of FVA adjustments from the major South African banks, to South African large firms in general. The results of a panel regression of the net profit of these firms reveal that unrealised FVA adjustments do have a persistent influence on future earnings, indicating that these adjustments contain both transitory and persistent elements. A further panel regression of the annual dividends declared by these firms indicates that dividend payments do include a portion of unrealised FVA gains, as expected by the persistent nature of a portion of these unrealised FVA gains. DA - 2016 DB - OpenUCT DP - University of Cape Town LK - https://open.uct.ac.za PB - University of Cape Town PY - 2016 T1 - Do fair adjustments influence dividend policy for South African firms? TI - Do fair adjustments influence dividend policy for South African firms? UR - http://hdl.handle.net/11427/23725 ER - en_ZA
dc.identifier.urihttp://hdl.handle.net/11427/23725
dc.identifier.vancouvercitationGrimmer B. Do fair adjustments influence dividend policy for South African firms?. [Thesis]. University of Cape Town ,Faculty of Commerce ,Department of Finance and Tax, 2016 [cited yyyy month dd]. Available from: http://hdl.handle.net/11427/23725en_ZA
dc.language.isoengen_ZA
dc.publisher.departmentDepartment of Finance and Taxen_ZA
dc.publisher.facultyFaculty of Commerceen_ZA
dc.publisher.institutionUniversity of Cape Town
dc.subject.otherFinancial Managementen_ZA
dc.subject.otherfair value accountingen_ZA
dc.subject.otherdividend policyen_ZA
dc.subject.otherearnings persistenceen_ZA
dc.titleDo fair adjustments influence dividend policy for South African firms?en_ZA
dc.typeMaster Thesis
dc.type.qualificationlevelMasters
dc.type.qualificationnameMComen_ZA
uct.type.filetypeText
uct.type.filetypeImage
uct.type.publicationResearchen_ZA
uct.type.resourceThesisen_ZA
Files
Original bundle
Now showing 1 - 1 of 1
Loading...
Thumbnail Image
Name:
thesis_com_2016_grimmer_brian.pdf
Size:
1.06 MB
Format:
Adobe Portable Document Format
Description:
Collections