Title page for ETD etd-07172011-101055


Document Type Master's Dissertation
Author Tshitangano, Funanani
URN etd-07172011-101055
Document Title Cost of financial distress model for JSE listed companies : a case of South Africa
Degree MBA
Department Gordon Institute of Business Science
Supervisor
Advisor Name Title
Mr R Gunn Committee Chair
Keywords
  • probability of financial distress
  • bendford law
  • cost of financial distress
Date 2011-04-12
Availability unrestricted
Abstract

The idea behind the study was to answer the question: how costly is financial distress and what is an appropriate model in quantifying these costs for JSE listed entities? The objective was to find a sample of companies that were purely financially distressed on the bases of interest coverage and then to follow those through the resolution of the distress, to see what happened to them and to quantify how costly those factors were. The analysis was conducted through a robust regression exercise and a time series investigation. Quality control was done through outlier investigations and Benford law distribution to determine human influence on the financial statements. It was found that the average costs of financial distress for JSE listed companies is approximately 16.7% market value per annum. The South African appropriate model for JSE listed companies resulted in the cost of financial distress being inversely related to the change in investment policy, holding of liquid assets, size of an entity and Tobinís Q ratio, but directly related to the economic effect, probability of financial distress and change in employment policy.

© 2010 University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria.

Please cite as follows:

Tshitangano, F 2010, Cost of financial distress model for JSE listed companies : a case of South Africa, MBA dissertation, University of Pretoria, Pretoria, viewed yymmdd < http://upetd.up.ac.za/thesis/available/etd-07172011-101055/ >

F11/9/240/ag

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