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Capital structure decisions of globally-listed shipping companies

journal contribution
posted on 2023-06-08, 15:07 authored by Wolfgang Drobetz, Dimitrios Gounopoulos, Andreas Merikas, Henning Schroder
Debt capital has traditionally been the most important source of external ?nance in the shipping industry. The access that shipping companies nowadays have to the capital markets provides them with a broader range of ?nancing instruments. As such, this study investigates the determinants of capital structure decisions using a sample of 115 exchange-listed shipping companies. We test whether listed shipping companies follow a target capital structure, and we analyze their adjustment dynamics after deviations from this target leverage ratio. When compared with industrial ?rms from the G7 countries, shipping companies exhibit higher leverage ratios and higher ?nancial risk. Standard capital structure variables exert a signi?cant impact on the cross-sectional variation of leverage ratios in the shipping industry. Asset tangibility is positively related to corporate leverage, and its economic impact is more pronounced than in other industries. Pro?tability, asset risk, and operating leverage are all inversely related to leverage. There is only weak evidence for market-timing behavior of shipping companies. Because demand and supply in the maritime industry are closely related to the macroeconomic environment, leverage behaves counter-cyclically. Using different dynamic panel estimators, we further document that the speed of adjustment after deviations from the target leverage ratio is lower during economic recessions. On average, however, the capital structure adjustment speed in the maritime industry is higher compared with the G7 benchmark sample. These ?ndings indicate that there are substantial costs of deviation from the target leverage ratio due to high expected costs of ?nancial distress. Our results have implications for shipping companies’ risk management activities. ?

History

Publication status

  • Published

Journal

Transportation Research Part E: Logistics and Transportation Review

ISSN

1366-5545

Publisher

Elsevier

Volume

52

Page range

49-76

Department affiliated with

  • Economics Publications

Full text available

  • No

Peer reviewed?

  • Yes

Legacy Posted Date

2013-09-09

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