Original Research

Managerial confidence and capital structure announcement effects on share prices on the Johannesburg Share Exchange

Lerato Mapela, Chimwemwe Chipeta
South African Journal of Economic and Management Sciences | Vol 26, No 1 | a4849 | DOI: https://doi.org/10.4102/sajems.v26i1.4849 | © 2023 Lerato Mapela, Chimwemwe Chipeta | This work is licensed under CC Attribution 4.0
Submitted: 21 September 2022 | Published: 31 March 2023

About the author(s)

Lerato Mapela, School of Economics and Finance, Faculty of Commerce, Law and Management, University of the Witwatersrand, Johannesburg, South Africa
Chimwemwe Chipeta, Department of Finance, Faculty of Commerce, Law and Management, University of the Witwatersrand, Johannesburg, South Africa


Background: In an attempt to enhance our understanding of the important determinants of the debt–equity choice, there is a need to explore the behavioural facets driving the decision to issue either debt or equity. Furthermore, the divergent set of implications of equity and debt issues on the share prices are empirical matters that need to be addressed.

Aim: In this article the link is investigated between managerial confidence and the likelihood of issuing debt, as well as the share price implications of equity and debt issue announcements on the Johannesburg Share Exchange (JSE).

Setting: The study is based on the equity bond issue announcements of JSE-listed firms for the period 2000–2020.

Method: In this article, panel data regression and event study approaches are used in a sample of 81 and 113 bond and equity issue announcements, respectively, for 69 firms listed on the JSE.

Results: The main findings of this article indicate that managerial optimism drives debt issuing activities on the JSE and that there are negative and significant abnormal returns associated with the announcement of equity issues.

Conclusion: Overall, we conclude that behavioural finance is an important factor driving capital structure decisions, and that signalling, as well as market-timing concerns drive share price reactions on the JSE.

Contribution: This article highlights the importance of behavioural factors in capital structure decisions and identifies the firm-specific channels through which managerial optimism drives leverage. Additionally, the article sheds light on the role of signalling and market timing in capital structure decisions.


bond and equity announcements; capital structure; managerial confidence; optimism; issuance; abnormal returns; event study

JEL Codes

G32: Financing Policy • Financial Risk and Risk Management • Capital and Ownership Structure • Value of Firms • Goodwill

Sustainable Development Goal

Goal 4: Quality education


Total abstract views: 1862
Total article views: 1750

Crossref Citations

No related citations found.