Impact of capital structure on profitability : the case of the Land and Agricultural Development Bank of South Africa

Abstract

The purpose of this study was to determine the impact of capital structure on the profitability of the Land and Agricultural Development Bank of South Africa (Land Bank). Both theoretical and empirical literature were reviewed in order to guide the empirical investigation of this study. In particular, the theories of financial intermediation, credit creation and fractional reserve formed the basis of this study. The capital structure theories that were examined included the pecking order theory, trade-off theory and Modigliani-Miller leverage irrelevance theory. In the literature, it was observed that profitable companies prefer using internal funds over debt or equity. To test the stated hypothesis that there is no relationship between capital structure and bank profitability, a quantitative research design with a case study approach was used, with the Land Bank as the unit of analysis. Using time series data for the period 1982 to 2015, multiple regression using the ordinary least squares method was applied to test the specified models. Preliminary data analysis was performed using trend analysis, descriptive statistics and Pearson bivariate correlation analysis. The study demonstrated that the relationship between capital structure and bank profitability was positive and statistically significant at a 95% confidence level when using only equity. However, inclusion of debt in the capital structure showed that capital structure, proxied by the debt-to-equity ratio, resulted in a negative relationship between capital structure and bank profitability, albeit statistically insignificant. It was concluded that the Land Bank requires an injection of equity to improve its performance. Alternative low-cost sources of funding to debt should be considered. The results of the study have policy implications for the Land Bank, regulators and potential investors.

Injongo yalolu cwaningo kwabe kuwukucubungula nokuthola umthelela wesimozimali sebhizinisi ekungeneni kwenzuzo eBhange Lokuthuthukiswa Komhlaba Nezolimo laseNingizimu Afrika (iBhange Lomhlaba). Kokubili, imibhalo yethiyori kanye nemibhalo esuselwe emaqinisweni abonakalayo naphathekayo, yabuyekezwa ukuze ihole futhi ilawule uphenyo olugxile emaqinisweni abonakalayo naphathekayo oluqondene nalolu cwaningo. Amathiyori ayisisekelo salolu cwaningo, ikakhulukazi, kwaba yi-financial intermediation, credit creation kanye ne-fractional reserve. Lawo mathiyori esimozimali sebhizinisi acutshungulwa abandakanya i-pecking order theory, trade-off theory kanye ne-Modigliani-Miller leverage irrelevance theory. Emibhalweni eyacutshungulwa, kwabonakala ukuthi izinkampani ezinenzuzo zincamela ukusebenzisa izimali zangaphakathi kunokusebenzisa isikweletu noma izabelokulingana (equity). Ngenhloso yokuhlola ihayiphothesisi ethuliwe yokuthi abukho ubudlelwano phakathi kwesimozimali sebhizinisi kanye nokungena kwenzuzo ebhange, kwasetshenziswa idizayini yocwaningo olukhwantithethivu ehambisana nendlela yokusebenzisa ucwaningo lwesigameko egxile ekuhlaziyweni kweBhange Lomhlaba. Ngokusebenzisa i-time series data yesikhathi esisukela kowe-1982 kuyofinyelela kowezi-2015, kwalandelwa i-multiple regression ngokusebenzisa i-ordinary least squares method ukuhlola amamodeli achaziwe. Uhlaziyo lwedatha olwandulelayo lwenziwa ngokusebenzisa uhlaziyo lwezimonkambiso (trend analysis), izibalomanani ezichazayo (descriptive statistics) kanye ne-Pearson bivariate correlation analysis. Ucwaningo lwabonisa ukuthi bukhona ubudlelwano obuphawulekayo phakathi kwesimozimali sebhizinisi kanye nokungena kwenzuzo ebhange futhi idatha yabonisa ukuthembakala okusezingeni elingama-95% uma kusetshenziswa izabelokulingana kuphela. Kodwa-ke ukufakwa kwesikweletu kwisimozimali sebhizinisi kwabonisa ukuthi isimozimali sebhizinisi, ngokusekelwa yizinga-silinganiso phakathi kwesikweletu nezabelokulinganisa, kwaholela ekutheni bungabi khona ubudlelwano obuphawulekayo phakathi kwesimozimali sebhizinisi kanye nokungena kwenzuzo ebhange, nakuba idatha mayelana nalokhu yabonisa ukungathembakali okuthile. Kwafinyelelwa esiphethweni sokuthi iBhange Lomhlaba lidinga ukuthi kufakwe izabelokulingana ngenhloso yokwenza ngcono ukusebenza kwalo. Kumele kwenziwe imizamo yokuthola eminye imithombo yezimali ehlukile futhi engambi eqolo. Imiphumela yocwaningo inemithelela ethile ephathelene nezinqubomgomo eqondene neBhange Lomhlaba, abalawuli kanye nalabo okungenzeka babe nesifiso sokutshala izimali.

Morero wa thutelo ye e be e le go laetša khuetšo ya matlotlo a kgwebo go bokgoni bja go hwetša dipoelo bja Panka ya Tlhabollo ya Naga le tša Temo ya Afrika Borwa (Land Bank). Dingwalo tša ditlhalošo tša diteori le tšeo dithutelo tša peleng di di hweditšeng di sekasekilwe go fa tlhahlo go dipoelo tša dinyakišišo tšeo di dirilwego peleng tša thutelo ye. Gabotsebotse, diteori tša mokgwa wa dipanka wa go tšea tšhelete ye e bolokilwego tša e adimiša, mokgwa wa dipanka wa go hlola dikadimo ka bontši le tsheketšo ya palophatlo ya tšhelete di bopile motheo wa thutelo ye. Diteori tša matlotlo a kgwebo tšeo di lekotšwego di akareditše teori ya mokgwa wa go kgetha methopo ya kadimo ya ditšhelete, teori ya go lekanyetša ditheko le ditefelokholego le teori ya Modigliani-Miller ya go re mokgwa wa go diriša tšhelete ye e adimilwego go bona dipoelo ga o ame boleng bja khamphani. Ka go dingwalo, go lemogilwe gore dikhamphani tše di ka hwetšago dipoelo di kgetha go diriša matlole a ka gare go ena le dikoloto goba bokaalo bjo bo šalago ka morago ga go ntšha dikoloto Go leka kakanyo ye e filwego ya gore ga go na tswalano gare ga matlotlo a kgwebo le bokgoni bja panka bja go hwetša dipoelo, tlhako ya nyakišišo ya go hwetša dikarabo go batho ka bontši ka mokgwatebelelo wa nyakišišo ye e dirilwego ka ga tiragalo e dirišitšwe, ka Land Bank bjalo ka yuniti ya tshekatsheko. Ka go diriša datha go ya ka tatelano ye e itšeng ya nako ya paka ya 1982 go iša go 2015, tlhahlobo ya tswalano gare ga mabaka a mabedi goba go feta ka go diriša mokgwa wa go fokotša palo ya disekwere e dirišitšwe go leka mehlala ye e šupilwego. Tshekatsheko ya datha ya mathomo e phethagaditšwe ka go diriša tshekatsheko ya taolelopele ya seo se tla diregago ka ditšhelete, mokgwa wa go sekaseka dipalopalo le tshekatsheko ya Pearson ya dipalo tše pedi go bona tswalano ya tšona. Thutelo e laeditše gore tswalano gare ga matlotlo a kgwebo le bokgoni bja panka go hwetša dipoelo go bile le ditlamorago tše botse le dipoelo tše di ka bago nnete ka kemo ya kgonthišo ya 95% ge go dirišwa fela bokaalo bjo bo šalago ka morago ga go ntšha dikoloto. Le ge go le bjalo, kakaretšo ya sekoloto ka go matlotlo a kgwebo go bontšhitše gore matlotlo a kgwebo, ao a laeditšwego ka tekanyo ya palomoka ya dikoloto go bokaalo bjo bo šalago ka morago ga go ntšha dikoloto, e hlotše tswalano ye e sa letelwago gare ga matlotlo a kgwebo le bokgoni bja panka go hwetša dipoelo, le ge e ka ba dipoelo tše di ka bago nnete. Go phethilwe ka go re Land Bank e nyaka koketšo ya bokaalo bjo bo šalago ka morago ga go ntšha dikoloto go kaonafatša tiro ye e swanetšwego go dirwa. Methopo ye mengwe ya tswala ya fase go dikoloto e swanetšwe go lebelelwa. Dipoelo tša thutelo di na le ditlamorago tša Molaotshepetšo wa Land Bank, balaodi le babeeletši ba ka moso.