The results of the data analysis of this study are presented in the tables in this chapter. The data presented summarises is for analysis over a three year period on a sample of twenty-eight (28) dual-listed South African companies.
Summary of Independent Variable Statistics
All the statistics in this table are based on averages over the period from 2005 to 2007. The averages over the three year period were used to dampen the short-term variability.
Table 4-1: Descriptive statistics for complete sample (n=28)
VARIABLE MIN AVERAGE MAX STANDARD
DEVIATION
BOD size 7.33 14.23 19.00 2.87
Local directors 4.67 12.65 18.00 3.20
Male directors 7.33 12.56 17.67 2.75
Female directors 0.00 1.68 4.33 1.05
International directors 0.00 1.58 6.00 1.48
HD directors 0.00 3.99 9.67 2.31
Independent directors 1.33 6.95 14.00 2.55
Female independent directors 0.00 1.10 2.67 0.80
HD independent directors 0.00 2.73 5.00 1.23
Audit committee size 2.00 4.53 8.00 1.17
Executive directors 1.00 3.48 9.33 1.80
Non-executives (non-independent)
0.67 3.38 9.67 2.42
Remuneration committee size 3.00 4.33 7.00 0.93
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able 4-2: Raw Data All Companies (n=28) Board sizeFemales ratioIntl ratioDiversityExec ratioIndep RatioHD ratioAudit size %
Remun comm size %Indep females Indep HDs PMTATEMROEROATobin's Q ox110.090.476.000.190.440.250.280.280.333.000.121.041.9525.1512.882.59 glo American160.090.114.670.260.510.130.320.280.671.670.230.601.9326.9113.981.96 glogold 170.080.188.000.220.460.160.340.220.002.33-0.190.353.32-22.58-6.792.00 glo Platinum180.050.058.000.220.250.220.250.271.002.000.290.811.9445.1423.233.96 M160.120.0610.670.410.490.470.240.182.005.000.300.481.3319.1014.372.08 rloworld190.070.198.670.490.470.190.180.261.333.000.051.322.6717.226.461.41 T130.080.033.000.310.410.150.310.281.002.000.031.832.9815.005.046.08 st Rand150.090.004.670.200.710.220.370.471.332.670.280.0621.6636.471.681.08 oldfields 140.020.443.330.150.660.200.340.370.002.000.060.391.503.532.352.21 armony100.200.139.000.270.530.570.430.331.333.330.000.241.500.010.001.49 ighveld130.050.286.000.230.280.130.280.280.671.670.241.581.8368.4937.372.58 pala130.240.089.330.360.450.450.320.292.003.000.340.641.4431.2721.733.55 vested Plc170.120.066.330.240.460.200.400.181.003.330.260.0514.5518.951.301.05 erty120.060.084.330.170.500.220.440.330.671.670.060.2517.0526.711.571.10 ethold160.140.009.330.120.490.450.340.242.503.500.060.0310.471.720.161.02 etorex70.000.362.670.450.180.000.270.410.000.000.280.421.8622.0111.802.16 spers 130.160.007.000.160.790.390.420.392.005.000.170.521.7115.168.842.45 bank180.110.1910.330.110.450.320.450.300.333.000.150.0914.7618.651.260.74 ld Mutual 120.000.002.000.200.540.200.430.370.002.000.080.0914.9110.820.731.42 C120.080.175.330.420.330.140.310.310.001.000.251.202.2065.9830.024.97 B130.100.215.000.150.440.080.330.331.001.000.120.611.9514.147.257.74 ppi 130.110.165.670.240.710.240.340.321.333.330.020.902.634.401.671.11 nlam180.240.0713.670.110.780.260.220.282.674.670.120.1411.5420.221.751.04 ntam150.130.007.000.130.470.330.270.302.004.000.100.753.3324.027.221.31 sol 150.270.1313.000.290.470.530.240.331.503.500.170.811.8625.9113.962.28 kom110.240.0012.330.090.330.880.390.550.333.670.170.831.9727.7814.082.35 ngaat 180.090.004.670.350.330.170.240.241.002.000.230.812.3242.8018.471.64 oolworths 120.230.179.670.310.600.370.260.342.003.330.051.822.5624.639.611.89 in7.330.000.002.000.090.180.000.180.180.000.00-0.190.031.33-22.58-6.790.74 erage 14.230.120.127.170.250.490.280.320.311.102.730.140.655.4722.399.232.32 ax19.000.270.4413.670.490.790.880.450.552.675.000.341.8321.6668.4937.377.74 ev2.870.080.113.200.110.150.190.080.080.801.230.120.526.0318.9410.181.65
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Table 4-3: Raw Data -Financial companies (n=7) DirectorsFem ratioExec ratioIntl ratioIndep RatioHDratioAuditRemunIndep HDsNon-exec rationon- exec/indepPMTATEMROETobin’s Q First Rand150.10.200.000.710.220.370.472.670.130.190.280.0621.6636.471.08 Invested Plc170.10.240.060.460.200.400.183.330.280.610.260.0514.5518.951.05 Liberty120.10.170.080.500.220.440.331.670.330.670.060.2517.0526.711.10 Methold160.10.120.000.490.450.340.243.500.240.500.060.0310.471.721.02 Nedbank180.10.110.190.450.320.450.303.000.430.960.150.0914.7618.650.74 Old Mutual 120.00.200.000.540.200.430.372.000.260.470.080.0914.9110.821.42 Sanlam180.20.110.070.780.260.220.284.670.110.140.120.1411.5420.221.04 Min11.670.000.110.000.450.200.220.181.671.670.140.060.0310.471.720.74 Average15.330.110.160.060.560.270.380.312.982.980.510.140.1014.9919.081.06 Max18.000.240.240.190.780.450.450.474.674.670.960.280.2521.6636.471.42 Stdev2.580.080.050.070.130.090.080.091.001.000.280.090.073.6811.050.20
50
able 4-4: Raw Data -Non-Financial companies (n=21) DirectorsFemales ratioExec ratioIntl ratioDiversityIndep RatioHD ratioAuditRemunIndep HDs
non- exec ratio
non- exec/inde pPMTATEMROEROATobin’s Q 10.670.090.190.476.000.440.250.280.283.000.380.860.121.041.9525.1512.882.59 merican0.580.090.260.114.670.510.130.320.281.670.130.250.230.601.9326.9113.981.96 old5.030.080.220.188.000.460.160.340.222.330.260.57-0.190.353.32-22.58-6.792.00 latinum0.580.050.220.058.000.250.220.250.272.000.532.070.290.811.9445.1423.233.96 0.000.120.410.0610.670.490.470.240.185.000.100.210.300.481.3319.1014.372.08 orld0.000.070.490.198.670.470.190.180.263.000.040.070.051.322.6717.226.461.41 0.580.080.310.033.000.410.150.310.282.000.230.560.031.832.9815.005.046.08 elds1.000.020.150.443.330.660.200.340.372.000.150.220.060.391.503.532.352.21 ny4.040.200.270.139.000.530.570.430.333.330.230.440.000.241.500.010.001.49 ld0.580.050.230.286.000.280.130.280.281.670.501.820.241.581.8368.4937.372.58 0.580.240.360.089.330.450.450.320.293.000.080.180.340.641.4431.2721.733.55 x0.580.000.450.362.670.180.000.270.410.000.362.000.280.421.8622.0111.802.16 rs1.150.160.160.007.000.790.390.420.395.000.050.070.170.521.7115.168.842.45 12.000.080.420.175.330.330.140.310.311.000.250.750.251.202.2065.9830.024.97 2.000.100.150.215.000.440.080.330.331.000.380.880.120.611.9514.147.257.74 1.000.110.240.165.670.710.240.340.323.330.080.110.020.902.634.401.671.11 0.580.130.130.007.000.470.330.270.304.000.270.570.100.753.3324.027.221.31 0.580.270.290.1313.000.470.530.240.333.500.270.570.170.811.8625.9113.962.28 4.360.240.090.0012.330.330.880.390.553.670.611.820.170.831.9727.7814.082.35 at 2.080.090.350.004.670.330.170.240.242.000.331.000.230.812.3242.8018.471.64 orths0.000.230.310.179.670.600.370.260.343.330.110.190.051.822.5624.639.611.89 0.000.000.090.002.670.180.000.180.180.000.000.07-0.190.241.33-22.58-6.791.11 e1.860.120.270.147.150.460.290.300.312.642.640.720.140.852.1423.5512.032.76 12.000.270.490.4413.000.790.880.430.555.005.002.070.341.833.3368.4937.377.74 2.800.080.110.122.970.150.210.060.081.311.310.680.130.470.6021.1510.481.71
51
The t-statistic significance tests undertaken in this study are determined by sample size and degrees of freedom (dF) are shown inTable 4-5 below. Table 4-5: T-Test Significance SAMPLE SIZET-VALUE 72.571 212.093 282.056 Table 4-6: Board size trend over three year period YEARHDFEMALESINTERNATIONALSBOARD SIZE 20053.251.262.0714.04 20064.001.631.8714.43 20074.471.772.0013.50
52
he correlation coefficients and the corresponding t-value of the complete sample were computed and tabulated inTable4-7 below. able 4-7: Correlation coefficients & t-values (n=28, t-valve threshold = 2.056) ependent ariable
ROE PM TAT EM Tobin’s Q ROA ρt-valueρt-valueρt-valueρt-valueρt-valueΡt-value oard Size -0.0143-0.073 0.01950.100 -0.1551-0.800 0.20601.074 -0.2084-1.086 -0.0973-0.498 dependent tio-0.4257-2.399** -0.3063-1.641 -0.2925-1.560 0.31581.697 -0.4173- 2.341**-0.5546- 3.399** male ratio -0.0564-0.288 0.02760.141 0.04250.217 -0.1430-0.737 -0.0021-0.011 0.00090.005 ternational tio-0.0301-0.154 -0.1204-0.618 0.19421.010 -0.3298-1.781 0.19591.019 0.11660.598 D ratio -0.1345-0.692 -0.0032-0.016 -0.0849-0.434 -0.1078-0.553 0.00870.044 -0.0379-0.194 dit comm ratio -0.2949-1.574 -0.1799-0.932 -0.5217-3.118** 0.47662.764** -0.2523-1.330 -0.4221- 2.374** dep HD ratio -0.2713-1.437 -0.0781-0.400 -0.1448-0.746 0.03980.203 -0.2533-1.335 -0.2473-1.301 xec ratio 0.23411.228 0.26931.426 0.40532.261** -0.3755-2.066** 0.34261.859 0.36051.971 n-exec/indep 0.43512.464** 0.30671.643 0.14200.732 -0.1707-0.883 0.32911.777 0.48452.824** *: statistically significant correlation based on t-test statistic
53
After undertaking a sector analysis it was discovered that companies that are in the financial sector have a much higher utilisation of financial leverage. It was then decided to further split the sample into financial and non-financial sub-samples. The correlation coefficient and t-value of the non-financial sub-group are tabulated inTable4-8. None of the correlation coefficients were found to be statistically significant. Table 4-8: Correlation coefficients & t-values non-financial (n=21, t-valve threshold = 2.093). Dependent Variable ROE PM TAT
EM
Tobin’s Q ROA ρt-valueρt-valueρt-valueρt-valueρt-valueΡt-value Board Size 0.02850.124-0.0386-0.1680.02420.1050.27041.224-0.1110-0.4870.02650.115 Independent directors-0.5414-2.807** -0.4228-2.034 -0.1485-0.654 -0.0069-0.030 -0.2720-1.232 -0.5471-2.849** female directors-0.0483-0.2110.01270.0560.00770.034-0.1499-0.661-0.1288-0.566-0.0422-0.184 international directors-0.0854-0.373 -0.1367-0.602 -0.0242-0.106 -0.2062-0.918 -0.0273-0.119 -0.0496-0.216 HD directors-0.1065-0.4670.03520.153-0.1475-0.650-0.2701-1.223-0.2852-1.297-0.0667-0.291 Directors in audit committee -0.3683-1.727 -0.2597-1.172 -0.4253-2.049 -0.2318-1.039 0.08830.386 -0.3196-1.470 Independent female directors-0.0448-0.195 0.13200.581 0.10040.440 -0.0306-0.133 -0.1545-0.681 -0.0471-0.206 Independent HD directors-0.2696-1.221 -0.1183-0.519 -0.0460-0.201 -0.2696-1.221 -0.4423-2.149** -0.2403-1.079 Exec ratio 0.20250.90140.27571.25010.20090.8940-0.0405- 0.1766-0.0703-0.30720.20240.9010 Non-exec/indep ratio0.47232.336** 0.36111.688 0.04940.216 -0.1017-0.445 0.18590.825 0.48372.409** **: statistically significant correlation coefficient based on t-test statistic
54
nalysis of the financial sector companies yieldedTable 4-9 below which had no significant t-statistic. able 4-9 : Correlation coefficients & t-value for finance firms(n=7, t-valve threshold = 2.571). Dependent VariableROE PM TAT EM Tobin’s Q ROA ρt-value ρt-value ρt-value ρt-valueρt-valueΡt-value Board Size -0.0961-0.216 0.338780.805 -0.4278-1.058 -0.4146-1.019 -0.7457-2.503 0.526091.383 Independent directors 0.447461.119 0.224340.515 0.107490.242 0.181970.414 0.191170.436 0.526091.383 female directors -0.0599-0.134 0.101590.228 -0.0989-0.222 -0.5123-1.334 -0.5199-1.361 0.237490.547 international directors 0.139490.315 -0.0347-0.078 0.319710.754 -0.1024-0.230 -0.7474-2.516 0.365110.877 HD directors -0.6258-1.794 -0.4203-1.036 -0.3763-0.908 -0.5828-1.604 -0.4752-1.208 -0.649-1.908 Directors in audit comm0.07391
0.166 -0.016
-0.036 0.11008
0.248 0.42277
1.043 0.00335
0.007 -0.0877
-0.197 Directors in Remuneration comm0.5881.6260.1490.3370.1510.3420.7672.673**0.3010.7060.3060.719 Independent female directors-0.1805
-0.410 -0.0483 -0.108 -0.1773 -0.403 -0.4728 -1.200 -0.2009
-0.459 -0.049
-0.110 Independent HD directors-0.2189
-0.502 0.16174
0.366 -0.3447
-0.821 -0.5895 -1.632 -0.3894 -0.945 0.07592
0.170 Exec ratio0.303720.713 0.563751.526 -0.1629-0.369 0.527071.387 0.531241.402 0.112120.252 Non-exec/indep ratio-0.2448-0.564 -0.2158-0.494 0.082690.186 -0.1063-0.239 -0.4549-1.142 -0.2418-0.557 *: statistically significant correlation coefficient based on t-test statistic
55
Summary of Independent Variable Statistics All the statistics in this table are based on averages over the period from 2006 to 2008. The averages over the three year period were used to dampen the short-term variability. Table 4-10: Independent variable descriptive statistics for financial sector sub-group (n=7) VARIABLEMINAVERAGEMAXSTANDARD DEVIATION BOD size11.6715.3318.002.58 Local directors11.0014.3816.672.23 Male directors11.3313.5215.671.55 Female directors0.001.814.331.39 International directors0.000.953.331.19 HD directors2.334.197.331.80 Independent directors6.008.6714.002.80 Female independent directors0.001.212.671.03 HD independent directors1.672.984.671.00 Audit committee size4.005.718.001.28 Executive directors2.002.484.000.77 Non-executives 2.003.907.671.95 Remuneration committee size3.004.677.001.28
56
able 4-11: Dependent variable descriptive statistics for total sample (n=28) VARIABLEMINAVERAGEMAXSTANDARD DEVIATION PM-0.190.140.340.12 TAT0.030.651.830.52 EM1.335.4721.666.03 ROE (Du Pont Identity) -22.5822.3968.4918.94 ROA-6.799.2337.3710.18 Tobin’s Q0.741.924.970.97 ummary of Dependent Variable Statistics for financial sector companies able 4-12: Dependent variabledescriptive statistics for financial sector companies (n=7) VARIABLEMINAVERAGEMAXSTANDARD DEVIATION PM0.060.140.280.09 TAT0.030.100.250.07 EM10.4714.9921.663.68 ROE (Du Pont Identity) 1.7219.0836.4711.05 ROA0.161.211.750.58 Tobin’s Q0.741.061.420.20
57
Table 4-13: Correlation Coefficients– whole sample (n=28). This table depicts Pearson’s correlation coefficient and it is a summary of the key variables that were analysed for the whole sample. The Pearson correlation coefficient measures the strength and direction of a linear relationship between the variables. DirFemale ratioExec ratioIntl ratioDiv- ersityIndep ratioHD ratio Audit com ratioIndep HDs Non-exec ratio
Nonexec/ indep RatioPMTATEMROEROATobin’s Q tors1.085-.153-.325.338.158-.091-.290.321-.160-.241.000-.163.215-.045-.130-.220 ale ratio.0851-.121-.331.835(**) .261.744(**) -.099.644(**) -.132-.221.023.051-.165-.054.018.046 _ratio-.153-.1211.108-.151-.368-.227-.445(*) -.297-.293-.022.306.350-.384(*) .232.364.331 ational -.325-.331.1081-.216-.168-.358-.184-.007-.397(*) .113.179-.123.201-.332-.026.121 sity.338.835(**) -.151-.2161.138.707(**) -.229.689(**) -.008-.083-.001-.048-.099-.069.014.003 _ratio.158.261-.368-.168.1381.133.228.576(**) -.711(**) -.811(**) -.311-.290.312-.424(*) -.551(**) -.417(*) ratio-.091.744(**) -.227-.358.707(**) .1331.192.659(**) .082-.057-.006-.086-.112-.133-.034.012 itcom -.290-.099-.445(*) -.184-.229.228.1921-.022.147-.060-.179-.508(**) .483(**) -.286-.416(*) -.248 uncom -.559(**).080-.188-.007-.082.122.315.3431-.114.194.207.061-.040.097.084-.029 _HDs .321.644(**) -.297-.397(*) .689(**) .576(**) .659(**) -.0221-.374(*) -.479(**) -.079-.146.040-.270-.247-.253 exec -.160-.132-.293.113-.008-.711(**) .082.147-.374(*) 1.903(**) .139.043-.010.330.318.173 exec_inde io-.241-.221-.022.179-.083-.811(**) -.057-.060-.479(**) .903(**) 1.313.141-.171.435(*) .484(**) .329 .000.023.306-.123-.001-.311-.006-.179-.079.139.3131-.038.012.716(**) .658(**) .417(*) -.163.051.350.201-.048-.290-.086-.508(**) -.146.043.141-.0381-.582(**) .407(*) .538(**) .369 .215-.165-.384(*) -.332-.099.312-.112.483(**) .040-.010-.171.012-.582(**) 1-.052-.479(**) -.533(**) -.045-.054.232-.026-.069-.424(*) -.133-.286-.270.330.435(*) .716(**) .407(*) -.0521.865(**) .541(**) -.130.018.364.121.014-.551(**) -.034-.416(*) -.247.318.484(**) .658(**) .538(**) -.479(**) .865(**) 1.753(**) ’s Q-.220.046.331.196.003-.417(*) .012-.248-.253.173.329.417(*) .369-.533(**) .541(**) .753(**) 1 ** Correlation is significant at the 0.01 level (2-tailed). * Correlation is significant at the 0.05 level (2-tailed).
58
Table 4-14: Correlation coefficients – non-financial companies (n=21) This table depicts Pearson’s correlation coefficient and it is a summary of the key variables that were analysed for non-financial sector companies. The Pearson correlation coefficient measures the strength and direction of a linear relationship between the variables. DirFemale ratioExec ratioIntl ratioDiv- ersityIndep ratioHD ratio Audit com ratioIndep HDs Non-exec ratio
Nonexec/ indep RatioPMTATEMROEROATobin’s Q rs1-.020.025-.365.167.074-.136-.475(*) -.613(**).189-.184-.240-.072.018.288-.010-.013 ratio-.0201-.047-.477(*) .783(**).245.724(**).201.203.562(**)-.071-.217.005.091-.137.024.054 tio.025-.0471-.016-.040-.302-.248-.470(*) -.325-.237-.354-.105.342.101-.134.189.199 -.365-.477(*) -.0161-.382-.046-.426-.106.033-.442(*) .063.100-.144-.017-.205-.081-.045 ty.167.783(**) -.040-.3821.088.821(**)-.047.109.658(**).028-.090.024-.051-.149-.044.031 tio.074.245-.302-.046.0881.205.400.028.597(**)-.728(**)-.823(**)-.428-.146-.008-.540(*) -.544(*) o-.136.724(**) -.248-.426.821(**).2051.342.443(*) .713(**).079-.081.033-.151-.276-.104-.063 m -.475(*) .201-.470(*) -.106-.047.400.3421.504(*) .143.007-.106-.267-.398-.215-.354-.308 com -.613(**) .203-.325.033.109.028.443(*) .504(*) 1-.011.320.311.040-.085-.200-.011-.054 Ds .189.562(**) -.237-.442(*) .658(**).597(**).713(**).143-.0111-.364-.486(*) -.120-.088-.046-.269-.240 -.184-.071-.354.063.028-.728(**).079.007.320-.3641.916(**).195.054-.037.393.389 - io-.240-.217-.105.100-.090-.823(**)-.081-.106.311-.486(*) .916(**)1.368.047-.105.472(*) .484(*) -.072.005.342-.144.024-.428.033-.267.040-.120.195.3681-.038-.612(**).738(**).799(**) .018.091.101-.017-.051-.146-.151-.398-.085-.088.054.047-.0381.382.454(*) .344 .288-.137-.134-.205-.149-.008-.276-.215-.200-.046-.037-.105-.612(**).3821-.233-.374 -.010.024.189-.081-.044-.540(*) -.104-.354-.011-.269.393.472(*) .738(**).454(*) -.2331.964(**) -.013.054.199-.045.031-.544(*) -.063-.308-.054-.240.389.484(*) .799(**).344-.374.964(**)1 Q-.125-.079-.025-.018-.285-.267-.285.091-.002-.442(*) .255.185.147.216-.054.197.195 ** Correlation is significant at the 0.01 level (2-tailed). * Correlation is significant at the 0.05 level (2-tailed).
59
Table 4-15:Correlation coefficients – Financial companies (n=7) This table depicts Pearson’s correlation coefficient and it is a summary of the key variables that were analysed for financial sector companies. The Pearson correlation coefficient measures the strength and direction of a linear relationship between the variables. DirFemale ratioExec ratioIntl ratioDiv- ersityIndep ratioHD ratio Audit com ratioIndep HDs Non-exec ratio
Nonexec/ indep RatioPMTATEMROEROATobin’s Q tors1.673-.428.462.852(*) .147.376-.481-.478.855(*) -.066.019.378-.439-.394-.080.143 ale ratio.6731-.500.295.831(*) .532.190-.755(*) -.278.769(*) -.391-.337.126.194-.264.246.512 _ratio-.428-.5001-.427-.771(*) -.151-.706.398.117-.458-.085-.094.543-.140.535.317.128 .462.295-.4271.451-.315.047.263-.266.096.678.690-.011.305-.097.133.350 sity.852(*) .831(*) -.771(*) .4511.287.529-.678-.456.880(**)-.136-.077-.084-.086-.611-.201.115 _ratio.147.532-.151-.315.2871-.230-.768(*) .465.447-.876(**)-.892(**).209.086.176.445.525 ratio.376.190-.706.047.529-.2301-.217-.331.370.130.182-.414-.363-.592-.633-.656 itcom -.481-.755(*) .398.263-.678-.768(*) -.2171.153-.844(*) .796(*) .763(*) .008.101.429.066-.167 uncom -.478-.278.117-.266-.456.465-.331.1531-.476-.286-.354.149.151.767(*) .588.306 _HDs .855(*) .769(*) -.458.096.880(**).447.370-.844(*) -.4761-.458-.387.157-.359-.589-.218.073 exec -.066-.391-.085.678-.136-.876(**).130.796(*) -.286-.4581.994(**)-.244.171-.066-.221-.224 exec- ratio.019-.337-.094.690-.077-.892(**).182.763(*) -.354-.387.994(**)1-.195.108-.101-.239-.237 .378.126.543-.011-.084.209-.414.008.149.157-.244-.1951-.446.566.601.474 -.439.194-.140.305-.086.086-.363.101.151-.359.171.108-.4461.149.365.506 -.394-.264.535-.097-.611.176-.592.429.767(*) -.589-.066-.101.566.1491.849(*) .531 -.080.246.317.133-.201.445-.633.066.588-.218-.221-.239.601.365.849(*) 1.884(**) .143.512.128.350.115.525-.656-.167.306.073-.224-.237.474.506.531.884(**)1 ’s Q-.749-.553.539-.752-.673.180-.465.026.301-.399-.382-.451-.209.082.118-.115-.197 ** Correlation is significant at the 0.01 level (2-tailed). * Correlation is significant at the 0.05 level (2-tailed).