Consolidation of the number of treasury shares: The South African experience

Abstract

Unlike most other values found in companies' annual reports, there are no accounting standards that prescribe the calculation of market capitalisation and net asset value per share. These two figures play quite a significant role when valuing and comparing different companies. It is also frequently used in determining when a company should repurchase its own shares. In South Africa the number of the holding company's shares can differ from the total number of the group's shares after consolidation, as subsidiaries and share trusts are allowed to hold shares in their holding company. The published financial statements of a sample of JSE-listed companies were investigated to determine which number of shares companies use to calculate net asset value per share and market capitalisation, and if it is used consistently. Eight different combinations of consolidated and unconsolidated numbers of shares were found in the calculations of market capitalisation and net asset value per share showing inconsistency in application across the JSE-listed companies.

The effect of share repurchases on corporate investment policies: The South African experience

“…The body of research into South African share repurchases is limited, mainly owing to the lack of comprehensive share repurchase data (Bester, Wesson & Hamman 2010). Previous research has, however, confirmed that the South African share repurchase experience, in general, mirrors the global experience: Share repurchases have grown in popularity (Fortuin 2015;Vermeulen & Yaffar 2014;Wesson, Bruwer & Hamman 2015) and a positive share price reaction has been observed subsequent to share repurchase announcements (Bhana 2007;Wesson, Muller & Ward 2014, 2017. Corporate payout behaviour by JSE-listed companies indicates that, although the value of dividends still exceeds share repurchase value, a decrease in the number of dividendpaying companies has been evident over time (Wesson et al 2015).…”