Political cost hypothesis and earning management : evidence from the South African construction industry
- Authors: Booi, Vuyo Happy
- Date: 2017
- Subjects: Construction industry - South Africa , Construction industry - Economic aspects - South Africa , Construction industry - Finance , Earnings management - South Africa , Managerial accounting - South Africa
- Language: English
- Type: Masters (Thesis)
- Identifier: http://hdl.handle.net/10210/245809 , uj:25467
- Description: M.Com. (International Accounting) , Abstract: This study investigated the political cost hypothesis in the South African construction industry during periods of political scrutiny (event period). Specifically, it investigated whether JSE listed construction firms used earnings-decreasing accruals to manage earnings in order to reduce political visibility and associated costs during the Competition Commission’s investigations. It tested the political cost hypothesis for the full industry, for the large and mid-cap firms and for the firms fined by the Competition Commission. The discretionary component of total accruals was used as proxy for earnings management – calculated by using the Modified Jones Model. It was found that, in the event period, no earnings-decreasing discretionary accruals could be detected for the full industry and the large-mid cap firms. However, there were earnings-decreasing accruals for firms fined by the Competition Commission although the results were not statistically significant.
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Investigation of a financial model for small and medium sized contractors in South Africa
- Authors: Ndlovu, Sithembiso
- Date: 2012-06-05
- Subjects: Construction industry - Finance , Construction industry - Management , Construction industry - Capital investments
- Type: Thesis
- Identifier: uj:2387 , http://hdl.handle.net/10210/4841
- Description: M. Tech. , The financing needs of contractors, especially emerging contractors, need to be explored. In the case of the Small, Medium and Micro-Enterprises (SMMEs’) within the contracting sector, a type of “finance-PLUS” arrangement, which sees the lender, or an intermediary, offer additional support services to emerging enterprises, would be worth exploring. There are various perspectives and opinions on the format and context of the contribution. One of these perspectives embraces the obstacles involved in the entrepreneurial process hindering contribution and economic catalisation. This study follows a focused approach towards the investigation of a financial model for small, medium sized contractors in South Africa. Interviews were conducted and questioners were sent out to different constructors who have been successful in the business for more than five years and also contractors who are currently straggling and trying to survive and grow. Conclusions will be drawn from the analysis and recommendations will be made for further study and curriculum revision, if necessary. All types of businesses need capital before and after they start operating as well as for expansion purpose. The problem is people who have been listed on credit bureaus have their records count against them when they apply for a loan. A key factor mitigating against increased investment in the SMMEs’ sector is the structure of the financial sector. The findings of the study point to the fact that conventional financing mechanisms do not allow for cost-effective provision of finance to large numbers of entrepreneurs seeking small quantities of finance. Effects of poverty and lack of assets mean that many people do not have the collateral needed to access finance. The study also found that although there are different initiatives that are in place to assist small and medium size contractors the typical problems and challenges are still existing. The scopes of this study only focused on small, medium and micro-enterprise in the built environment (specifically the construction industry). In addition, the study focuses on the different financial programmes that are currently in place. An overarching concern is that previously disadvantaged individuals do not have adequate access to credit offered by formal financial institutions and therefore are forced to seek relatively expensive (and often inadequate) amounts of credit from alternative financial sources.
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Cost and schedule overruns on construction projects in South Africa
- Authors: Mukuka, Mulenga Joseph
- Date: 2015-06-26
- Subjects: Construction industry - Management - South Africa , Construction industry - Economic aspects , Construction industry - Finance , Project management
- Type: Thesis
- Identifier: uj:13631 , http://hdl.handle.net/10210/13811
- Description: M.Tech. (Construction Management) , The construction industry is a key sector in the development and economic growth of South Africa. However, the industry has not escaped the challenges facing other countries worldwide in terms of delivering construction projects within budget and on time as stipulated in the contracts. This study assesses the causes, effects and measures of minimising construction projects cost and schedule overruns in the Gauteng Province of South Africa. The data used in this study were derived from both primary and secondary sources. The secondary data was collected via detailed review of related literature. The primary data was collected through a questionnaire which was distributed to construction professionals. Out of the 200 questionnaires sent out, 146 were received representing a 73% response rate. Findings revealed that inadequate planning, change in project design, poor project management, inadequate financial provision and inaccurate estimates were the major causes of construction projects cost overruns. Furthermore the study also showed that the causes of construction projects schedule overruns in Gauteng province included: slowness in decision making process, reworks due to errors during construction, delays in approving major changes in the scope of work, delay in material delivery, shortage of skilled equipment operators and low productivity level of workers. Additionally, it was observed that construction project delays, increased project cost due to extension of time, liability of companies to bad debt and project abandonment. The study also revealed that extension of time, cost overruns, loss of profit, disputes and poor quality of work due to hurrying the project were the major effects of construction projects schedule overruns. Likewise, the study revealed that adequate planning, proper pre-contract planning, proper project implementation and management and good workmanship were the most effective ways of minimising construction projects cost overruns. Finally the results revealed that proper project planning and scheduling, effective strategic planning, site management and supervision, frequent coordination between the construction team, availability of clear information and communication channels were the most effective ways of minimising construction projects schedule overruns in the Gauteng Province of South Africa. It is recommended that all members of construction teams be trained and educated of the factors that cause project cost and schedule overruns in order to minimise these overruns.
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Ensuring positive cash flow by prompt payment in the construction industry
- Authors: Van Vuuren, Elizabeth Louiza
- Date: 2015-01-20
- Subjects: Construction industry - Finance , Construction industry - Accounting
- Type: Thesis
- Identifier: uj:13155 , http://hdl.handle.net/10210/13178
- Description: M.Ing. (Engineering Management) , Ensuring and maintaining positive cash flow is becoming more and more difficult, especially in the construction industry. Payments need to be collected to be able to sustain a positive cash flow and this is not an easy process. Organizations fail due to insufficient available liquid assets and this study is done to determine why payments aren’t made, including information on what payment provisions contractors agree upon, and why the trend in the industry is to keep cash rather than pay suppliers. The collection of outstanding payments is also investigated, including actions taken if payments are not made, what clauses are included in contracts to ensure payment and if interest is charged on outstanding payments. A credit application processes need to be in place to ensure the credit worthiness of the clients/ employers is reviewed. It is also very important that some form of contract is agreed upon, understood and signed by both parties. There are instances where the contract documentation is not provided or the contract documents is provided and signed, but one of the parties has not read or understood some of the payment clauses. This could also lead to delayed payments. Collection of outstanding payments could be to propose a payment agreement, by charging interest or alternatively, enforcing early payments by providing a settlement discount. One of the most mentioned reasons for companies holding onto cash is to ensure liquid capital is available to ensure positive cash flow and the continuation of the business. The main reasons why liquid capital is not available is poor management of funds, poor payment procedures and mismanagement of funds. It was found that most of the construction companies have credit application processes, contracts and payment provisions in place, but most of these companies don’t adhere strictly to the procedures set out in these documents. More attention need to be given to enforcing credit and collection policies in practice, as well as following the payment provisions set out in the construction documentation. Questionnaires were only sent to companies operating in the construction industry. Further investigations can be done on other industries (including construction, mechanical, electrical, medical, farming, food sector, fashion sector etc.), which can assist in assisting with payments made by companies or individuals.
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