Capital structure, corporate governance and financial performance : an empirical study of the South African retail sector

Abstract

Capital structure has been a subject of debate for a number of decades. Extensive research explaining various theories of capital structure can be found. The most notable theories are the Modigliani and Miller capital structure irrelevance propositions; the trade-off theory, and the pecking order theory. Corporate governance is a topic that has also been investigated for decades; and in recent years, plenty of corporate scandals, environmental problems and globalisation as a whole have impacted the awareness of corporate governance in firms. The wholesale and retail sector accounts for a large portion of South Africa’s Gross Domestic Product, which signifies that the retail sector is worth exploring in order to obtain an overview of their capital structure, corporate governance and financial performance. Therefore, due to inconsistent findings in earlier studies this study attempted to determine the relationships between capital structure, corporate governance and financial performance within the retail industry in South Africa. This study comprised of 18 South African firms in the wholesale and retail sector listed on the JSE. The data was extracted for a ten-year period ranging from 2009 to 2018. Panel data econometric techniques were used to conduct the analysis. The first objective was to determine the relationship between capital structure and financial performance of South African retail firms. The second objective was to determine if corporate governance practices of South African retail firms had an impact on their financial performance. Firstly, the study found a negative relationship between capital structure and financial performance of South African retail firms. Secondly, the study documented that board size and institutional ownership were negatively related to financial performance. Thirdly, the study found that board independence and firm size were positively related to financial performance. The study concluded that the corporate governance practices and capital structure choices influenced the financial performance of South African retail firms for the period of this study. Comparatively, capital structure had a higher impact on financial performance than corporate governance practices. It is recommended that South African retail firms observe good corporate governance practices as well as prudent capital structure policies as these have a significant impact on their financial performance.

Kapitaalstruktuur is reeds vir baie jare 'n onderwerp van bespreking. Omvattende navorsing verduidelik verskillende teorieë van kapitaalstruktuur, waarvan Modigliani en Miller se kapitaalstruktuur van irrelevante proposisies, die kompromisteorie en die rangordeteorie die prominentste is. Die onderwerp van korporatiewe beheer word ook reeds vir dekades ondersoek; en die afgelope paar jaar het baie korporatiewe skandale, omgewingsprobleme en globalisering as geheel, die bewustheid van korporatiewe beheer in firmas beïnvloed. Die groot- en kleinhandelsektor vorm 'n groot deel van Suid-Afrika se bruto binnelandse produk, wat daarop dui dat dit die moeite werd is om die handelsektor te ondersoek om 'n oorsig van hul kapitaalstruktuur, korporatiewe beheer en finansiële prestasie te kry. Na aanleiding van inkonsekwente bevindinge van vroeëre studies, poog hierdie studie om die verhouding tussen kapitaalstruktuur, korporatiewe beheer en finansiële prestasie in die Suid-Afrikaanse handelindustrie te bepaal. Hierdie studie beslaan 18 Suid-Afrikaanse firmas in die groot- en kleinhandelsektor wat op die JSE gelys is. Die data vir tien jaar, van 2009 tot 2018, is onttrek. Deursnitdata-ekonometriese tegnieke is gebruik om die ontleding te doen. Die eerste doelwit was om die verhouding tussen kapitaalstruktuur en finansiële prestasie van Suid-Afrikaanse handelsfirmas te bepaal. Die tweede doelwit was om te bepaal of korporatiewebeheerpraktyke van Suid-Afrikaanse handelsfirmas 'n invloed op hul finansiële prestasie het. Die studie het eerstens bevind dat daar 'n negatiewe verhouding tussen kapitaalstruktuur en finansiële prestasie van Suid-Afrikaanse handelsfirmas is. Die studie beweer tweedens dat die grootte van die direksie en institusionele eienaarskap negatief verwant aan finansiële prestasie is. Derdens het die studie bevind dat direksie-onafhanklikheid en firmagrootte positief verwant aan finansiële prestasie is. Die studie het tot die gevolg gekom dat keuses van korporatiewebeheerpraktyke en kapitaalstruktuur die finansiële prestasie van Suid-Afrikaanse handelsfirmas vir die tydperk van hierdie studie beïnvloed het. In vergelyking, het kapitaalstruktuur 'n groter invloed op finansiële prestasie as korporatiewebeheerpraktyke gehad. Dit is aanbevole dat Suid-Afrikaanse handelsfirmas goeie korporatiewebeheerpraktyke en verstandige kapitaalstruktuurbeleide volg omdat dit 'n beduidende invloed op hul finansiële prestasie het.

Emasumini ambalwa weminyaka, isakhwo sezeemali, kukade siyindaba esematheni kukulumopikiswano. Irhubhululo elinabileko lihlathulula amathiyori ahlukahlukeneko wesakhiwo sekhaphithali, kanti amathiyori atjhejeke khulu ziintjhukumiso zokungasebenzisani ze-Modigliani kanye neze-Miller capital structure, ithiyori ye-trade-off, kanye nethiyori ye-pecking order. isihloko segavanensi yezerhwebo (corporate governance) kukade siphenywa emasumini weminyaka; neminyakeni yagadesi, iimpoyilo ezinengi kezerhwebo, imiraro yezebhoduluko kanye nehlelo loke letuthuko efanako yephasi loke (globalisation) koke lokhu kube nomthelela phezu kokuyeleliswa ngokwegavanensi yezerhwebo emafemini. Umkhakha werhwebo le-holiseyila kanye neritheyila zenza ingcenye ekulu yomkhiqizo woke wenarha (GDP) eSewula Afrika, lokhu okuyinto etjengisa ukuthi umkhakha wezeritheyila ukuphenywa kwawo kunenzuzo yokobana kutholakale isakhiwo sawo sekhaphithali ngobufitjhazana, igavanensi yezerhwebo kanye nobujamo bezeemali. Yeke-ke, ngenca yelwazi elitholakeleko elingafaniko emarhubhululweni wokuthoma, leli rhubhululo belizama ukuthola ubudlelwano obuphakathi kwesakhiwo sekhaphithali, igavanensi yezerhwebo kanye nobujamo bezeemali ngaphakathi kwebubulo leritheyila eSewula Afrika. Leli rhubhululo lifaka phakathi amafema weSewula Afrika ali-18 emkhakheni weholiseyila kanye neritheyila atloliswe ku-JSE. Idatha ikhitjhelwe isikhathi seminyaka elisumi, ukuthoma ngo-2009 ukufikela ku-2018. Iindlela ze-panel data econometric zisetjenzisiwe ukwenza itsengo. Umnqopho wokuthoma bekukuthola ubudlelwano obuphakathi kwesakhiwo sekhaphithali kanye nobujamo bezeemali emafemini weritheyila eSewula Afrika. Umnqopho wesibili bekukuthola ukuthi ngabe mhlambe iinkambiso zegavanensi yezamarhwebo kumafema weritheyila eSewula Afrika zibe nomthelela na phezu kobujamo beemali. Kokuthoma, irhubhululo lifumene bona kunobudlelwano obumbi phakathi kwesakhiwo sekhaphithali kanye nebujameni beemali emafemini weritheyila eSewula Afrika. Kwesibili, irhubhululo litlole ukobana ubukhulu bebhodo kanye nobunikazi beziko zikhombise zinobudlelwano obumbi phezu kobujamo bezeemali. Kwesithathu, irhubhululo lifumene bona ukuzijamela kwebhodo kanye nobukhulu befema zikhombise zinobudlelwano obuhle ebujameni bezeemali. Irhubhululo liphethe ngokuthi amahlelo akhethwe yigavanensi yezerhwebo kanye nesakhiwo sekhaphithali abe nomthelela ebujameni bezeemali emafemini wezeritheyila eSewula Afrika viii esikhathini serhubhululo. Nakumadaniswako, isakhiwo sekhaphithali sibe nomthelela ophezulu ebujameni bezeemali ukudlula iinkambiso zegavanensi yezerhwebo. Kunconywe ukobana amafema wezeritheyila eSewula Afrika alandela iinkambiso ezifaneleko zegavanensi yezamarhwebo kanye nemithethomgomo emihle yesakhiwo sekhaphithali, njengombana lokhu kube nomthelela obonakalako phezu kobujamo bawo wezeemali