The impact of labour-related risks on financial investment decision-making regarding long-term insurance assets

[摘要] ENGLISH ABSTRACT: Notwithstanding the importance of institutional financial investments and labour to the SouthAfrican economy, relatively little attention has been paid by researchers to theinterdependence of these two issues. As a result of this gap in the existing literature, apotential exists for inefficient financial investment decision-making by institutional investorswith a resultant non-optimal allocation of valuable capital on the JSE Securities ExchangeSouth Africa (previously known as Johannesburg Stock Exchange).The objective of this study thus embodies the evaluation of the impact of labour-related riskson financial investment decision-making regarding long-term insurance assets, given thebasic theory available in this regard, so that the resultant recommendations can lead to abetter utilisation of the theory by investors in general. The resulting tasks of the study are asfollows:• To do a literature study of the basic theory available in this regard.• To obtain information about the relevant aspects, by means of personal interviews withinvestment practitioners responsible for financial investment decision-making, as far aslong-term insurance assets are concerned.• To develop a tool that can be used to measure the degree of labour-related risk atenterprises for the purpose of financial investment decision-making.• To make suitable recommendations based on the critical analysis of the obtainedinformation.Twenty-three interviews were conducted during March and the first half of April 1999 tocover the financial investment decision-making practices of the 47 participating long-terminsurers, resulting in a 100 per cent response rate. The personal interviews were structuredby using a written discussion guideline that was drafted with reference to the literature study.A distinction was made between the perceived labour-related risks in manual and knowledgeworker enterprises. In addition to general information, the discussion guideline required theparticipating institutions to disclose information about the financial investment decisionmakingprocess in use at their institutions and to respond with regard to the perceivedimportance of various labour-related risk factors. The discussion guideline also required theparticipants to rank certain aspects in order of their significance when the degree of labourrelatedrisk at enterprises is determined. Finally, questions were asked to determine therelative importance of labour-related risks in general when financial investment decisions aretaken.The information obtained during the interviews was summarised on an Excel spreadsheet andsubjected to an elaborate statistical analysis to satisfy the objectives of the study. Themajority of the data that were obtained during the survey are ordinal, because the discussionguideline made use of an ordinal level of measurement. With this in mind, the mean (as ameasure of central tendency) and the range (as a measure of dispersion) are used to describethe data. Spearman's rank correlation coefficient is used as a measure of correlation. Thesign test, being one of the simplest non-parametric tests, is used throughout the study toinvestigate whether the observed differences in opinion regarding manual worker andknowledge worker enterprises are significant.The study highlights the significant role of long-term insurance assets on the JSE SecuritiesExchange South Africa, as well as the significant differences between manual and knowledgeworker enterprises regarding the perceived importance of labour-related risk factors for thepurpose of financial investment decision-making. The large number of labour-related riskfactors and the existence of significant correlation between many of them reflects thecomplicated nature of labour-related risks. The respondents regard labour-related risksbetween moderately and highly important for manual and knowledge worker enterpriseswhen financial investment decisions are taken. Classification trees are introduced as thepreferred method to deal with these complexities and to measure labour-related risks inmanual and knowledge worker enterprises for the purpose of financial investment decisionmaking.These classification trees are constructed based on the wealth of experience ofinvestment practitioners active in the long-term insurance industry at the time of the surveyand with reference to the literature study.Generally, the most critical labour-related aspects to consider when the degree of labourrelatedrisk at manual and knowledge worker enterprises is determined, are internal to theseenterprises and can be managed. Management and the labour force of enterprises should takecognisance of their responsibilities in this regard and the perceived ability they have tosignificantly influence the degree of labour-related risk at manual and knowledge workerenterprises. Other role players also have important roles to play in this regard, given theimpact of the external environment on the degree of labour-related risk. The responsibility ofenterprises to disclose the information required by investors to determine the prevailingdegree of labour-related risk at enterprises is matched by the responsibility of investmentpractitioners to request and rationally assess this information.The resulting conclusions and recommendations of this study and the tool that is developed tomeasure the degree of labour-related risk at enterprises for the purpose of financialinvestment decision-making are largely based on the perceptions of investment practitionersactive in the long-term insurance industry at the time of the survey. With this in mind, it isrecommended that future research activities be aimed at enhancing the value of theclassification trees developed in this study by applying the tree-growing method on actualcases where the variables can be measured and the eventual outcomes are determined.

[发布机构] Stellenbosch University