We examine the effect of institutional investors on the valuation of listed shipping firms. Institutional investors have a positive influence on the market value of shipping firms, confirming that institutional ownership is a “universal” corporate governance mechanism. This valuation effect is more pronounced in firms dominated by institutional investors with a short-term investment horizon. It is also stronger in firms with high stock liquidity, suggesting that short-term investors, through the threat of exit, are able to mitigate agency conflicts and improve corporate governance. Investment regressions indicate that shipping firms with a larger fraction of short-term investors are better able to exploit growth opportunities.
Maritime Financial Management
Unsere Forschungsgruppe Maritime Financial Management befasst sich den finanziellen Aspekten der kommerziellen Schifffahrtsindustrie. Die Publikationen der Forschungsgruppe Maritime Financial Management fallen in die Themenbereiche:
We examine the effects of geopolitical risk (GPR) and economic policy uncertainty (EPU) on shipping freight rates using a Bayesian VAR model. A positive shock to global GPR has an immediate positive, but gradually diminishing, effect on dry bulk shipping freight rates. This effect is driven by global rather than country-specific GPR shocks. Positive shocks to EPU indices for the U.S., Brazil, and China trigger a negative response of dry bulk shipping freight rates that builds gradually over several months. Historical cumulative effects of both GPR and EPU shocks on freight rates can be large and of different signs during different subperiods. Our results are important for both shipowners and charterers when fixing chartering strategies and prioritizing investments in newbuilding or second-hand vessels.
We measure the sensitivity of investment to changes in investment opportunities in the shipping industry, and test whether this relation is moderated by ownership concentration. For a sample of 126 globally listed shipping firms, we find that investment in commercial shipping follows freight rates, a measure of the potential income stream from owning a vessel. Ownership concentration, measured as the ownership stake of the largest shareholder, reinforces the positive effect of freight rates on investment, indicating a higher relative efficiency of capital allocation. The positive impact ownership has on the investment-freight rate sensitivity also translates into higher firm value. An analysis of investor identity shows that our results are driven by the group of firms where the largest owner is a financial investor, who is usually more focused on shareholder value maximization.
We examine the corporate cash holdings of listed shipping companies. Shipping firms hold more cash than similar firms in other asset-heavy industries. Higher cash holdings in the shipping industry are not attributable to firm- or country-level characteristics, but rather to the higher marginal value of cash. Shipping firms value an additional dollar of cash higher than matched manufacturing firms, regardless of their financial constraints status, but depending on their cultural background and the cyclicality of their expansion opportunities. Less procyclical shipping firms have a higher marginal value of cash, and this valuation effect is most pronounced in bad times of the business cycle when external capital supply tends to become scarce. Overall, it appears that shipping companies are more conservative than their peers in managing their cash positions.
Firms that go public on global stock markets are not obliged to disclose earnings forecasts in their prospectuses. We use this fact to examine the shipping industry, where most firms voluntarily issue earnings forecasts during the IPO process, thus providing unique, international‐level evidence. We find overall pessimistic forecasts of ship owners, primarily because of the industry's uncertain and volatile environment. High ship owner participation after going public is associated with less accurate earnings forecasts. Our results further indicate that financial leverage, a listing in an emerging stock market, and global market conditions are other main factors responsible for inaccurate earnings forecasts.
Using a system of equations model, we analyze how cash flow shocks influence the investment and financing decisions of shipping firms in different economic environments. Even financially healthy shipping firms felt strong negative effects on their financing activities during the recent crisis. These firms were nevertheless able to increase long-term debt. Banks internalized the impact of foreclosure decisions on vessel prices and avoided an industry-wide collateral channel effect. Even during benign economic conditions, financially weak shipping firms underinvest because of their inability to raise sufficient external capital. The substitution between long- and short-term debt during the pre-2008 crisis periods shows that the composition of financing sources is more indicative of whether firms face financial constraints than the pure size of the financing-cash flow sensitivities. An analysis of firms’ excess cash holdings confirms the importance of financial flexibility.
This study explores macroeconomic and industry-level effects on corporate systematic risk (or beta) for the international shipping industry. We document the extent to which stock market betas fluctuate over time in this asset-intensive and cyclical industry. Moreover, we analyze the fundamental determinants of systematic risk. We find evidence for high levels of systematic risk in shipping stocks, which match the fundamental risk characteristics of the industry (such as high financial and operating leverage). Shipping firms exhibit distinct industry-specific beta dynamics compared to firms from benchmark sectors or the average firm in the S&P 500 index. Changes in both economic conditions and industry-specific risk factors explain large proportions of beta variation in the cross-section of firms and over time.
Based on practices and legislation in the shipping industry, we construct a corporate social responsibility (CSR) disclosure index for listed shipping companies. We use Markov Chain Monte Carlo (MCMC) techniques for Bayesian inference, and we estimate the marginal effects of firm characteristics on CSR disclosure for each firm. Our results show a positive relationship between CSR disclosure and financial performance for each firm in our international sample. Firm size, financial leverage, and ownership structure are also associated with CSR disclosure. Our findings suggest that a majority of listed shipping companies have integrated CSR practices into their strategic planning and operations.