The Effect Of Earnings Per Share Categories On Share Price Behavior: Some South African Evidence

Earnings per share (EPS) is considered as an important accounting indicator of risk, entity performance and corporate success. It is used to forecast potential growth in future share prices, because changes in EPS are often reflected in share price behaviour. Companies listed on the Johannesburg Share Exchange (JSE) are required to publish three different categories of EPS: basic, diluted and headline EPS. It has become apparent that there is no indication as to which category explains share price behaviour best. The study therefore aimed to determine which category of EPS is best associated with share prices of the top 40 JSE listed companies in South Africa. No South African studies have previously attempted to answer this question. The top 40 JSE listed companies were selected as the research sample and the relationship between different categories of EPS and share prices was analysed empirically for the period 2005 to 2013. This study demonstrated that basic EPS correlated best with the changing behaviour of share prices. Furthermore, the study established that headline EPS proved to deliver lower correlation coefficients than other EPS categories. Based on the findings of this study some useful recommendations and areas for further research were also identified

A COMPARISON OF THE CAPITAL STRUCTURES OF THE TOP 40MULTINATIONAL ENTITIES AND THE TOP 40 JSE-LISTED ENTITIES

The strategies and policies of multinational entities (MNEs)centre onthe focalgoal of any company, which isto maximise profits and shareholder wealth.Management aims for an optimum ownership structure by implementing variousstrategies. One of these strategies is the debt-to-equity ratio (the capital structure).Previous studiesconductedonvariouscountries’locally-listed entities confirmthat the capital structure of an entity has an impact on the value ofthat entity.Thisthen raisesan interesting question as to whetherthecapital structures ofthetop 40Johannesburg Stock Exchange (JSE)-listedentitiesare similar to those ofthe top40 global MNEs.Based on market capitalisation on 31December2014, this studysought to compare the capital structures,using the debt-to-equity ratio,ofthe top40JSE-listed entitieswith those ofthe top 40globalMNEs on the Fortune 500list.Independent t-testswere performed on thedebt-to-equity ratios of thetop 40JSE-listed entities and the top 40globalMNEsas a group.Both independent t-tests and the Mann-Whitney testswereperformedonthedebt-to-equity ratiosofapplicable entities of the group divided into threeselectedindustries. The resultsof theindependent t-testindicateastatistical andpractically significant differencebetween the top 40 JSE-listed entities and the top 40 global MNEs’ capitalstructures.The resultsof the Mann-Whitney testsindicatethat if the financialindustry is excluded,there isnostatistical orpractically significant differencebetween the capital structures of the top 40 JSE-listed entities and the top 40MNEs.However, based on the effect size there is a practical visible difference