Rajendra Rajaram

The impact of financial risks on share prices concerns investors, company executives and accounting standards developers. Investors need this information in delineating their equity valuation models while company executives need the information to make appropriate capital structure decisions. Accounting standards developers use this information in their policy to make accounting standards contemporary.
The authors examine the link between relative and absolute financial risks and share prices using a dynamic panel of non-financial listed companies on the Zimbabwe Stock Exchange after dollarization. Equity investors incurred losses before dollarization, which prompted this investigation into the sphere of financial risks in order to explain share price movements so that investors can use it to minimize losses in the future. Absolute financial risk is measured by the total debt, while debt/equity ratio measures relative financial risk. Market capitalization as a proxy for equity and debt is measured by total liabilities. An average debt/equity ratio greater or equal to one qualifies a firm into the high-risk category while ratios below one imply low-risk firms. Results from two-step System Generalised Method of Moments (GMM) show negative and significant connection between relative risk and share prices across risk categories. The impact of absolute risk on share prices differs by risk category. Firm managers are advised to keep total liabilities below market capitalization in order to enjoy the benefits of low-risk categorization. Debt ratio is a reasonable indicator of value and investors can use it in equity valuation. Mandatory reporting of debt ratios should be considered by accounting standards developers.

This study aims to examine the internal determinants of financial performance of food supermarkets listed on the South African stock exchange. Food supermarkets play an integral role in socio-economic development of the country. The study employed an econometric approach utilizing fixed effect panel data. Drawing information from audited financial statements, data were gathered from four major listed food supermarkets in South Africa covering the period from 1994 to 2022, resulting in a total of 116 observations over 29 years. The robust longitudinal statistics obtained from balanced data revealed a significant positive correlation between equity financing, size of corporate governance, and current debt with financial performance, as measured by sales revenue at 0.0000, 0.054, and 0.000 significance levels, respectively. The findings indicate that as these variables increase, the financial performance of the studied food supermarkets (Shoprite, Woolworths, Spar, and Pick n Pay) also increases. Conversely, a negative and significant relationship is noted between company age, current assets, and financial performance at significance levels of 0.007 and 0.002, respectively. This suggests that as these variables increase, financial performance will decrease. As per the research findings, it is imperative for supermarkets to uphold a well-rounded blend of equity and debt and adopt inventive business approaches as they mature to improve financial outcomes. Therefore, the study proposes a framework focusing on internal factors that impact the financial performance of listed food supermarkets in South Africa.