Corporate financial policy requires managers to balance financing, investment, and payout decisions while maintaining sufficient financial flexibility to respond to unexpected shocks and investment opportunities. Despite the importance of financial flexibility, limited empirical evidence exists on its determinants in African capital markets. Using panel data from 106 non-financial firms listed on the Johannesburg Stock Exchange over the period 2000–2019, this study examines the determinants of financial flexibility. Financial flexibility is identified by comparing actual and predicted leverage and classifying firms with persistent spare debt capacity as financially flexible. The main empirical model is estimated as a random-effects linear probability model with heteroscedasticity-robust standard errors. The results show that financial flexibility is significantly negatively associated with leverage and Tobin’s Q, indicating that firms with higher debt levels and stronger growth opportunities are less likely to preserve borrowing capacity. Retained earnings and financing cost show weak negative associations at the 10% significance level, while dividend payout, profitability, cash holdings, and tangibility are statistically insignificant. The study contributes to the corporate finance literature by providing new evidence from an African emerging market context, incorporating payout policy into the financial flexibility framework, and showing how leverage discipline and growth-related financing demands shape firms’ financial flexibility.

This study examines the sensitivity of empirical findings in financial flexibility research to alternative measurement approaches. Financial flexibility is widely recognised as a critical determinant of corporate financing and investment decisions, yet there is no consensus on its operational definition. Existing studies employ different proxies, in-cluding spare debt capacity, cash holdings, leverage positioning, and composite measures, which may capture distinct dimensions of financial flexibility. Using panel data from 106 non-financial firms listed on the JSE over the period 2000–2019, this study compares two widely used proxies: spare debt capacity derived from predicted leverage models (Marchica and Mura 2010) and a composite low-leverage–high-cash measure (Arslan-Ayaydin, Florackis, and Ozkan 2014). Fixed- and random-effects models, along with logistic regression, are employed to assess whether the determinants of financial flexibility remain consistent across these measures. The findings reveal substantial vari-ation in coefficient signs, statistical significance, and economic interpretation across proxies. Classification-overlap analysis shows limited agreement between the proxies, with only 24.1% of firm-year observations classified as flexible under both measures and Cohen’s kappa indicating only fair agreement. Growth opportunities, retained earnings, dividend payout, and selected firm-specific variables exhibit strong sensitivity to meas-urement choice, while some relationships remain relatively stable. The results demon-strate that financial flexibility is not a measurement-invariant construct and that proxy selection can materially alter empirical and theoretical conclusions. The study contributes to corporate finance literature by highlighting the importance of construct validity, proxy transparency, and robustness testing, particularly in emerging market contexts.

This study examines the sensitivity of empirical findings in financial flexibility research to alternative measurement approaches. Financial flexibility is widely recognised as a critical determinant of corporate financing and investment decisions, yet there is no consensus on its operational definition. Existing studies employ different proxies, including spare debt capacity, cash holdings, leverage positioning, and composite measures, which may capture distinct dimensions of financial flexibility. Using panel data from 106 non-financial firms listed on the JSE over the period 2000–2019, this study compares two widely used proxies: spare debt capacity derived from predicted leverage models and a composite low-leverage–high-cash measure. Fixed- and random-effects models, along with logistic regression, are employed to assess whether the determinants of financial flexibility remain consistent across these measures. The findings reveal substantial variation in coefficient signs, statistical significance, and economic interpretation across proxies. Classification-overlap analysis based on the common SDC–LLHC sample shows limited agreement between the proxies, with only 17.4% of common-sample firm-year observations classified as flexible under both measures and Cohen’s kappa indicating only slight agreement. Growth opportunities, retained earnings, dividend payout, and selected firm-specific variables exhibit strong sensitivity to measurement choice, while some relationships remain relatively stable. The results demonstrate that financial flexibility, as operationalised through alternative empirical proxies, is not measurement-neutral, and that proxy selection can materially alter empirical and theoretical conclusions. The study contributes to corporate finance literature by highlighting the importance of construct validity, proxy transparency, and robustness testing, particularly in emerging market contexts.

Valuation methodologies vary across industries because firms differ in capital intensity, asset life, earnings stability, and exposure to risk. This study examines the valuation approaches used by South African equity analysts across diversified mining, platinum group metals mining, gold mining, retail, and banking sectors over the period 2018-2026, with non-financial firm coverage extending to 2024 and banking sector coverage extending to 2026. Using qualitative document analysis of 201 equity research reports covering 24 Johannesburg Stock Exchange-listed companies, including 19 non-financial firms and the five largest South African banks, the study identifies clear clustering of valuation methods by industry. The findings show that resource-based sectors are predominantly valued using intrinsic approaches such as life-of-mine discounted cash flow (DCF) and risk-adjusted net present value (NPV), while retail firms are primarily valued using earnings-based multiples. Gold mining exhibits a hybrid valuation pattern, and banking institutions are valued using balance-sheet- and profitability-based approaches anchored on book value, return on equity, and dividend flows. Overall, the results indicate that analyst valuation practice in the South African equity market is strongly industry-specific and aligned with the underlying economic characteristics of the sectors being analysed. The study contributes to the limited empirical literature on professional valuation practice in African capital markets and provides insights relevant to analysts, investors, and regulators.

Valuation methodologies vary across industries because firms differ in capital intensity, asset life, earnings stability, and exposure to risk. This study examines the valuation approaches used by South African equity analysts across the diversified mining, platinum group metals mining, gold mining, retail, and banking sectors over the 2018–2026 period, with non-financial firm coverage extending to 2024 and banking sector coverage extending to 2026. Using qualitative document analysis of 201 equity research reports covering 24 Johannesburg Stock Exchange-listed companies, including 19 non-financial firms and the five largest South African banks, the study identifies clear clustering of valuation methods by industry. The findings show that resource-based sectors are predominantly valued using intrinsic approaches such as life-of-mine discounted cash flow (DCF) and risk-adjusted net present value (NPV), while retail firms are primarily valued using earnings-based multiples. Gold mining exhibits a hybrid valuation pattern, and banking institutions are valued using balance-sheet- and profitability-based approaches anchored on book value, return on equity, and dividend flows. Overall, the results suggest that valuation practices in the sampled equity research reports are strongly industry-specific and broadly aligned with the underlying economic characteristics of the sectors analysed. The study contributes to the limited empirical literature on professional valuation practice in African capital markets and provides insights relevant to analysts, investors, and regulators.