Browsing by Author "Erasmus, Pierre D."

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    Assessing the business case for environmental, social and corporate governance practices in South Africa
    (AOSIS, 2019-11-28) Johnson, Ruth; Mans-Kemp, Nadia; Erasmus, Pierre D.
    Background: By focusing on sustainable financial and environmental, social and corporate governance (ESG) returns, companies and investors can do well by doing good. Despite growing interest in sustainable corporate practices, limited ESG-related research has been conducted in South Africa. Previous researchers have mainly focused on corporate governance. All three ESG aspects should, however, be addressed to ensure corporate sustainability. It is possible that the consideration of a composite ESG measure can conceal varying levels of consistency in the individual aspects. Aim: The main objective was to investigate the relationship between ESG and corporate financial performance (CFP) measures. Setting: Firms listed on the Johannesburg Stock Exchange between 2011 and 2016. A total of 66 firms were considered from six sectors. Methods: Data for the sample (359 firm-year observations) were analysed by conducting panel regressions. In line with international research, ESG was considered as the independent variable, while eight measures of CFP were individually considered as the dependent variables. Composite and individual ESG disclosure scores were obtained from Bloomberg. The respective accounting-based, market-based and value-based CFP measures were sourced from IRESS. Results: Two main trends emerged from this study. The majority of the significant relationships identified between variables were only observed: (1) once the composite ESG disclosure score was disaggregated and (2) when a distinction was made among sectors. Conclusion: The empirical evidence suggests that ESG aspects are not homogeneous across sectors. Firm leaders should hence employ a differentiated approach to address the most important risks relevant to their operating environments.
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    The familiar versus the unfamiliar : familiarity bias amongst individual investors
    (AOSIS Publishing, 2017-02-02) De Vries, Annalien; Erasmus, Pierre D.; Gerber, Charlene
    Purpose: The purpose of this study was to investigate the existence of familiarity bias amongst individual investors in the South African stock market. Problem investigated: According to Warren Buffet, one needs to maintain emotional detachment if one wants to be a successful investor. However, recent research indicates that the perceptions of companies’ products and brands may influence individuals’ investment decisions in the stock market. This phenomenon implies that the investment decisions of individual investors are not purely based on firm fundamentals as suggested by traditional finance theories, but might be driven partly by the positive or negative attitude they have towards certain companies’ products and brands. The existence of familiarity bias amongst individual investors was investigated to determine if individuals prefer to invest in companies they are familiar with as opposed to unfamiliar companies. Methodology: A quantitative approach was followed. An online survey was used to show images of familiar and unfamiliar company brands to respondents, whereafter respondents were asked to indicate whether they will invest in the shares of the identified companies. The statistical analysis entailed descriptive statistics as well as one-way analyses of variance to test the stated hypotheses. Main findings: The results of this exploratory study indicate that investors do exhibit familiarity bias when choosing between different companies to invest in. Value of the research: The inclination of individual investors to invest in familiar corporate brands can have implications for the marketing industry, financial markets, the performance of companies as well as the investment performance of individual investors in the sense that it would seem that company brands could have an influence on investment decisions.
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    Investor short-termis and managerial myopia : irrational behaviour or human nature
    (Stellenbosch : Stellenbosch University, 2015-08) Erasmus, Pierre D.
    ENGLISH ABSTRACT : The world seems to be moving faster and faster. Bombarded with an ever-expanding stream of new information and facing rapid technological change, we are experiencing intensified pressure to deliver immediate results. Nowhere is this more apparent than in capital markets. Investors harness sophisticated technology to gather, analyse and interpret information and react to new information almost instantaneously. Corporate managers’ ability to churn out satisfactory returns to shareholders is under constant scrutiny. In the era of “quarterly capitalism” (Barton, 2011: 86; Millon, 2002: 890), time is indeed money – requiring measurement “in nanoseconds rather than milliseconds” (Budish, Cramton & Shim, 2015). Surviving in such a fast-paced environment requires the ability to keep abreast of technological change, leading to significant changes in our behaviour. Advances in technological innovation not only influence how we behave, however, but may also have an impact on the way we think. Adapting to the challenges of the information revolution may have produced a neurological rewiring of our brain (Carr, 2011), resulting in a shortened attention span (Haldane & Davies, 2011: 1). The benefits associated with technological innovation therefore may have come at a cognitive cost. Despite concerns regarding increased shortsighted behaviour by shareholders and corporate management being raised by the business community for some time, empirical evidence assessing the causes and the consequences of this change in behaviour remains limited (Dallas, 2012: 268; Bøhren, Priestley & Ødegaard, 2009: 3). Given our poor understanding of the role short-termism played during the global financial crisis, I find myself sharing the concerns of those who feel that, if left unchecked, short-termism could severely disrupt long-term sustainable value creation (Davies, Haldane, Nielsen & Pezzini, 2014: 16; Dallas, 2012: 269; Rappaport, 2011: 5; Dobbs, 2009: 127). In this inaugural address, I will discuss how shorttermism impacts on corporate finance. I will start by providing an overview of short-termism by explaining how it influences our behaviour and the resulting impact on financial markets. Given the damaging consequences increased investor short-termism and managerial myopia could have on corporate performance and sustainability, I will then reflect on whether technological innovation and inappropriate incentives could have contributed to these two forms of short-termism. In conclusion, I will identify ways to reduce short-termism by referring to some of the problem areas I have identified.