The resilience of South African companies against strikes

The South African Labour Market has experienced labour disputes from as early as 1913 (Davenpot, 2013). These labour disputes serve as a visual illustration of the inefficiencies that reside in the collective bargaining process between the working class and the top management of a company (Becker and Olson, 1986). This study aims to investigate these inefficiencies and determine the impact that they may have on the shareholder value of a company. By doing this, an improved understanding of the South African Financial Markets can be developed. This study consists of a sample set of 46 strikes between 2003 to 2017. This represents only a fraction of the total amount of strikes that South Africa has experienced in recent years as the majority of strikes revolve around community disputes (Department of Labour, 2018). The study concluded that investors react negatively when a strike is longer than 10-days – leading to a sell-off of the company’s share. This led the study to further investigate whether duration plays a key part in the negative abnormal returns generated by a strike. It was then determined that strikes that were longer than 20-days resulted in far greater negative returns, whilst strikes that were shorter seemed to be overlooked by investors. The paper also found that the market is unable to predict an incoming strike that may possibly damage the financial integrity of a firm. Lastly, the study concluded that the amount of Net Income, Dividends Paid, Free Cash Flow, Cash and Debt listed in the financial statements did not significantly influence the abnormal returns induced by strikes.

Grantor

Department of Finance and Tax

Year dc:date.issued

2019

Author dc:creator

• Marais, Albertus Wynand Christoffel

Advisors dc:contributor.advisor

• Rajaratnam, Kanshukan
• Sokolovski, Valeri

• Finance

Handle dc:identifier.uri

https://hdl.handle.net/11427/31618

OAI identifier oai:identifier

oai:open.uct.ac.za:11427/31618