Rising corporate debt and value relevance of supply-side factors in South Africa

Michael Machokoto, Geofry Areneke, Boulis Ibrahim

Research output: Contribution to JournalArticle

Abstract

Motivated by the recent discovery of a significant increase in corporate debt in developed countries, we use a large sample of 775 listed companies to examine the dynamics and determinants of South African corporate debt. We find an 89% increase in the leverage of the average firm, from 11% in 1990 to 21% in 2015. Long-term and short-term debt increased by 103% and 67%, respectively. We find that this increase is pervasive, and cannot be explained entirely by either firm attributes or macroeconomic factors, despite the importance of the latter. Instead, we find supply-side factors to be the main determinants of the upward trend in corporate debt, highlighting their importance to corporate debt policies in emerging economies.
Original languageEnglish
Pages (from-to)26-37
Number of pages12
JournalJournal of Business Research
Volume109
DOIs
Publication statusAccepted/In press - 12 Nov 2019

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Value relevance
Supply side
Factors
South Africa
Corporate value
Corporate debt
Short-term debt
Macroeconomic factors
Leverage
Developed countries
Debt policy
Africa
Emerging economies
Listed companies

Cite this

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abstract = "Motivated by the recent discovery of a significant increase in corporate debt in developed countries, we use a large sample of 775 listed companies to examine the dynamics and determinants of South African corporate debt. We find an 89{\%} increase in the leverage of the average firm, from 11{\%} in 1990 to 21{\%} in 2015. Long-term and short-term debt increased by 103{\%} and 67{\%}, respectively. We find that this increase is pervasive, and cannot be explained entirely by either firm attributes or macroeconomic factors, despite the importance of the latter. Instead, we find supply-side factors to be the main determinants of the upward trend in corporate debt, highlighting their importance to corporate debt policies in emerging economies.",
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Rising corporate debt and value relevance of supply-side factors in South Africa. / Machokoto, Michael; Areneke, Geofry; Ibrahim, Boulis.

In: Journal of Business Research, Vol. 109, 01.03.2020, p. 26-37.

Research output: Contribution to JournalArticle

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