The Determinants of Financial Performance of South African State-Owned Entities


  • Ferina MARIMUTHU Durban University of Technology, South Africa
  • Jean Damascene MVUNABANDI Durban University of Technology, South Africa
  • Haruna MAAMA Durban University of Technology, South Africa



Capital Structures, Trade-off Theory, State Owned Enterprises, Government Financial Support, Asset Tangibility


Several state-owned enterprises (SOEs) have severally faced imminent collapse, resulting in various support from the government. This has increased the debt level of the government and the SOEs. The study examined the factors that influence the financial performance of South African SOEs. This study used a quantitative methodology and secondary data of 33 South African SOEs from 1995 to 2017. The data were analysed using a multiple regression model and the GMM estimation technique. The study's conclusions show a statistically significant inverse relationship between capital structure and financial performance. The evidence further showed that government intervention in financial assistance, such as grants, funds, rebates, and subsidies, has contributed to the poor performance of SOEs. The inverse association suggests that the SOEs performance continues to worsen despite government support, which is quite concerning. The results demonstrate that government support is not a sound choice for developing SOEs since it makes management more dependent on it to meet operational needs and seize expansion possibilities. Additionally, the increased use of debt stresses government finances due to the rise in government guarantees. The study concludes that, contrary to the agency theory, leverage does not enhance SOEs' performance, suggesting they should be careful when selecting their capital structure. Finally, the South African SOEs’ performance is being hampered by government support. The findings have several policy implications for the government and the management of SOEs.



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Author Biographies

Ferina MARIMUTHU, Durban University of Technology, South Africa

Ferina Marimuthu holds a PhD in Finance from the University of KwaZulu-Natal. Ferina is appointed as the Head of Department in Financial Accounting at the DUT.  She is an accomplished and seasoned professional with over two decades of extensive experience in higher education. As a scholar, she has published widely in the Accounting discipline with a focus on Management Accounting, Finance, Integrated Reporting, Environmental Accounting, Social Responsibility Accounting, Corporate Governance, and Accounting Education. Ferina is the general editor and author of several textbooks and has also reviewed for both local and international publishing houses. In addition, Ferina has to her credit, several DHET accredited publications comprising journals articles, conference proceedings and book chapters. Ferina’s esteemed authoring expertise combined with her academic experience blends theory and practice in her writing. Ferina has chaired conference sessions, collaborated with other scholars on research and presented at numerous regional, national, and international conference meetings.

Haruna MAAMA, Durban University of Technology, South Africa

Dr Haruna Maama holds a PhD in Accounting, Master of Philosophy and Master of Business Administration in Accounting. Dr Haruna Maama is a lecturer at the Financial Accounting Department at Durban University of Technology, South Africa. He is also a member of the Macroeconomics Research Unit (MRU) at the School of Accounting, Economics and Finance at UKZN. His research area includes integrated reporting, sustainability reporting, environmental/green accounting, corporate governance, climate change accounting, social responsibility reporting, value relevance etc.


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