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The Impact of Interest Rates on the South African Equity Market
Sammyjo Saliwe Nyemwererai Mapfumo, Michael Adelowotan, and Mellisa Mcgill
DOI: 10.15604/ejef.2023.11.0304.001
Abstract
This paper investigates the effects of interest rate fluctuations on the South Africa’s equity market. The Johannesburg Stock Exchange (JSE) – All Share Index (ALSI) was used as a proxy for the equity market, whilst treasury bill rates were used to represent interest rates. The Vector Auto Regression (VAR) model was applied to analyze the relationship between interest rates and the equity market. The Vector Error Correction Model (VECM) augmented the analysis by assessing the short and long-run dynamic relationship between the two variables. Monthly data was collected from Thomson Reuters and the South African Reserve Bank from 2002 to 2020. The results indicate that the relationship between interest rates and the equity market was significant but negative; that is, equity or share prices fall when the interest rates rise. A fall in share prices resembles poor or negative performance of the equity market; therefore, the market capitalization and share face value of listed companies is negatively affected. The outcomes of this study may assist the central bank in understanding the relationship between interest rates and equity prices, which can assist in the implementation of monetary policy tools that control interest rates volatility and reduce negative impact on the equity market. Policymakers and authorities could use the knowledge attained from this study to understand the relationship between interest rates and the equity market because an unnecessary increase in interest rates may negatively affect the equity market, leading to slow economic growth.
Keywords: Interest Rates, Equity Markets, VAR, VECM, Johansen Cointegration
Assessment of the Application of IFRS 9 Requirements by South African State-Owned Entities
Maramaga Doctorly Mapulane, Michael Adelowotan, and Garth Barnes
DOI: 10.15604/ejef.2023.11.0304.002
Abstract
The global financial crisis in 2008 nearly resulted in a possible total collapse in the financial markets, which resulted in the development of new International Financial Reporting Standard (IFRS) 9: Financial Instrument. This study’s objective is to assess the quality information presented in the accounting policies in relation to IFRS 9: Financial Instruments, by the selected South African State-Owned Entities (SA SOEs) listed in Schedule 2 of the Public Finance Management Act (PFMA). The researchers have been interested in the factors of implementation and compliance of IFRS, though most of these studies are dominated by Asian and European countries with few for Africa. Using qualitative content analysis, the authors assessed the quality information in the accounting policies in relation to IFRS 9 against SOEs’ financial reporting. This study found that most of the SOEs applied the requirements of the IFRS 9 standard in terms of classification and measurement of financial assets and liabilities, though there is still room for improvement on the quality of the information provided by SOEs in their financial reports. The improvement on the quality of financial reporting is critical, as it could in turn help to build trust and confidence of investors to attract further investment.
Keywords: State-Owned Entities, IFRS, Financial Instrument, Financial Reporting, Classification and Measurement
Exploring the Impact of Post-Investment Management on Investment Funds
Guizhou Wang and Hongrui Cui
DOI: 10.15604/ejef.2023.11.0304.003
Abstract
Post-investment management is an essential element in the functioning of equity investment funds. The question of whether post-investment management can improve the investment performance of investment funds is controversial. The article examines the impact of post-investment management on investment performance. The questionnaire survey data from 31 investment institutions and their equity funds data are adopted. The performance of investment funds is measured by the overall exit rate and the proportion of listed IPO exits for the robustness test. The post-investment management is measured by the scale of importance that investment institution employees evaluate their institutions’ focus on post-investment management. The results show that post-investment management impacts the performance of investment funds positively in terms of fund exit rates. However, post-investment management has a limited impact in promoting the exit rate of investment funds. The level of post-investment management and investment funds exit rates exhibit an inverse U-shaped relationship. The finding highlights the significance of post-investment management within equity investment institutions. However, investment institutions need to strike a balance between tapping and investing in potential firms and post-investment management. Excessive post-investment management may even reduce investment funds’ performance. Hence, a moderate level of post-investment management is recommended.
Keywords: Post-investment Management, Investment Funds, Equity Investment, Investment Performance, Questionnaire Survey, China
The Impact of Exchange Rate, Interest Rate, and International Trade in Selected South African Development Community (SADC) Countries: An ARDL Approach
Vincent Muziwakhile Mbongeleni Moloi
DOI: 10.15604/ejef.2023.11.0304.004
Abstract
This study focuses on the impact of exchange rates, interest rates, and international trade in 12 selected Southern African Development Community (SADC) countries. The lack of studies from Africa that investigated the impact between exchange rate, interest rate, and international trade served as a catalyst for this study. Additionally, this study employed the autoregressive distributed lag (ARDL) method to examine the impact of exchange rate, interest rate, and international trade for the period 2000 to 2021. Therefore, using the ARDL technique, the study found a significant negative impact between exchange rate and interest rate in the long run, while international trade had a positive but insignificant impact. Due to the negative exchange rate findings, this study concludes that the SADC countries must develop strategies to promote international trade, reduce trade deficits, and encourage economic growth. On the other hand, this study contributes to the intricate interplay of exchange rates, interest rates, and international trade in SADC by providing insights for policymakers to enhance economic stability and long-term growth ultimately benefiting the region’s economy and society.
Keywords: ARDL, Exchange Rate, Interest Rate, International Trade, SADC
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