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1 – 10 of 771The restructuring of shipping and shipbuilding companies in the midst of rapidly shrinking global shipping demand has become a prominent issue in Korea. In shipping finance, loan…
Abstract
The restructuring of shipping and shipbuilding companies in the midst of rapidly shrinking global shipping demand has become a prominent issue in Korea. In shipping finance, loan syndication featuring many creditors surges as the preferred option. However, increasing the numbers of creditors in the syndicate results in two opposite effects. First is the beneficial effect from their enhanced monitoring power. On the other hand, there is the adverse effect resulting from increased difficulty in coordination when syndicate members increase, particularly in bankruptcy. Our aim of this paper is to analyze the role of finance in the shipping and shipbuilder markets, and determine the theoretical optimal number of creditors for the shipping finance syndicate based on Bolton and Scharfstein (1996). The two issues above result from moral hazard and non-verifiability: coordination among many creditors for collection of bonds in case of default, and the enhancement of monitoring private benefit exploitation by the ship-owner during default. Considering the two conflicting forces result from an increase in creditor membership, we draw conclusions on determining the optimal number of creditors by considering trade-offs between these two factors: More creditors are preferred when the monitoring effect dominates. Otherwise, less creditors are preferred.
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Petrus W.C. Choy, T.L. Yip, Kelvin Pang and Eunha Lee
The purpose of this study is to identify the critical success factors to international ship finance centre (ISFC) and to understand the reasons behind ship financing decision by…
Abstract
Purpose
The purpose of this study is to identify the critical success factors to international ship finance centre (ISFC) and to understand the reasons behind ship financing decision by shipowners and their views on the potential of Shanghai to become an ISFC in the near future.
Design/methodology/approach
Survey questionnaire and follow-up interviews were conducted. The survey of this study was conducted by firstly sending online questionnaire with interview questions via email and then carrying out interview either on telephone or in-person with the interview questions to collect factual data and views from individual interviewees.
Findings
This study identified governmental support and stable policy, sound and favourable legal system, advanced maritime cluster and dynamic source of finance as critical success factors which can help Shanghai to evolve into an international maritime centre with dual function as an ISFC which is a synthesis with the maritime sector of an international finance centre.
Originality/value
This paper is known to be the first to link international maritime centre with ISFC.
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This paper investigates the announcement effect of shipping sale-and-leaseback (SLB) transactions. As an emerging source of financing, a growing deal of interest has been paid to…
Abstract
Purpose
This paper investigates the announcement effect of shipping sale-and-leaseback (SLB) transactions. As an emerging source of financing, a growing deal of interest has been paid to the SLB. However, little is known about a variety of aspects of SLB transactions in the shipping industry. In this regard, this study examines the stock market reaction to the SLB announcements of shipping firms and their impact on shareholders' wealth.
Design/methodology/approach
A sample of 15 shipping SLB deals commenced by publicly listed Korean shipping companies during 2009–2023 are examined in this research. The announcement effect is measured by abnormal returns (AR) of their stocks based on the event study analysis.
Findings
It is found that the AR on the shipping SLB announcement date is, on average, −0.84% while there is no statistical significance. However, the results indicate that shareholders of shipping companies engaging in large-sized SLBs can experience positive AR around the announcement date.
Originality/value
This study is the first attempt to investigate the announcement effect of SLB transactions on the shipping industry and their impact on shareholders' wealth. The findings in this research can offer implications for the financing decisions of shipping companies and investment decisions of stock investors.
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Ersin Firat Akgul and Ismail Bilge Cetin
This study aims to explain the facts about behavioral biases that cannot be explained by rational patterns in ship investments of small-size shipping companies.
Abstract
Purpose
This study aims to explain the facts about behavioral biases that cannot be explained by rational patterns in ship investments of small-size shipping companies.
Design/methodology/approach
A qualitative approach was adopted in this study. The systematic approach of Wolcott (1994) and the action flows proposed by Miles and Huberman (1994) were taken into consideration.
Findings
Factors affecting ship investments are classified as ship finance, market timing, ship specifications and profile and business models of ship investors. In addition, behavioral biases that stand out under each theme are explained in the light of behavioral finance literature.
Originality/value
The originality of this study rests on the lack of studies on behavioral aspects of ship investments.
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Yi-Chih Yang and Hsien-Pin Liu
This paper aims to investigate bank credit policies and uncover yacht building finance assessment factors from bank credit policies toward the yacht industry.
Abstract
Purpose
This paper aims to investigate bank credit policies and uncover yacht building finance assessment factors from bank credit policies toward the yacht industry.
Design/methodology/approach
This study’s questionnaire attempts to identify survey respondents’ degrees of awareness through difference analysis, and then uses entropy weighting and gray relational analysis to discover priority ranking order of bank credit assessment considerations from the perspective of Taiwan’s banking sector.
Findings
The research findings show that yacht builders have to review their ship financing application methods and improve shortcomings to meet banks’ credit granting requirements.
Originality/value
Banks emphasize yacht builders’ repayment ability to protect their depositors and shareholders.
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Yara Ahmed, Racha Ramadan and Mohamed Fathi Sakr
This paper aims to evaluate the progressivity of health-care financing in Egypt by assessing all five financing sources individually and then combining them to analyze the equity…
Abstract
Purpose
This paper aims to evaluate the progressivity of health-care financing in Egypt by assessing all five financing sources individually and then combining them to analyze the equity of the whole financing system.
Design/methodology/approach
Lorenz dominance analysis and Kakwani progressivity index were applied on data from 2010/2011 Household Income, Expenditure, and Consumption Survey and the National Health Accounts 2011 using Stata to evaluate the progressivity of each source of health-care finance and the financing system overall.
Findings
The data show that Egypt’s health-care system, which is largely financed by out-of-pocket (OOP) payments, is slightly regressive, with an overall Kakwani index of −0.079. The overall regressive effect was the result of three regressive sources (OOP payments, an earmarked cigarette tax and direct taxes), one proportional finance source (social health insurance) and two slightly progressive sources (indirect taxes and private health insurance). This shows that the burden of financing health care falls more on the poor. These results signal the need for reform of health-care financing in Egypt to reduce dependence on OOP payments to achieve more equitable financing.
Originality/value
The paper seeks to augment the literature on health-care financing in Egypt by calculating specific progressivity estimates for all five sources of financing the Egyptian health-care system and analyzing the overall equity of this financing system. It will, therefore, provide a benchmark for monitoring the equity of finance in the Egyptian health-care system in future studies and allow one to assess the impact of implemented financing reforms in the future on the level of progressivity of health system financing.
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This paper aims to investigate the impact of global macro and other risk factors of the New York Stock Exchange (NYSE)- and National Association of Securities Dealers Automated…
Abstract
Purpose
This paper aims to investigate the impact of global macro and other risk factors of the New York Stock Exchange (NYSE)- and National Association of Securities Dealers Automated Quotation (NASDAQ)-listed shipping companies’ stock returns from January 2001 to December 2019.
Design/methodology/approach
The methodological design includes multi-factor regressions for individual companies, augmented versions of these regressions to examine the likely impact of additional factors and finally panel regressions to assess the impact risk factors on all companies simultaneously. Estimations are done via ordinary least squares and the generalized method of moments.
Findings
Multi-factor model results showed that some of the US-specific and global macro risk factors surfaced as statistically significant for most of the companies and appeared to exhibit a consistent pattern in the way they affected shipping stocks. Thus, these companies’ exposures emanate mostly from the general US market’s movements and to a lesser extent from other firm-specific factors. Second, from the results of panel specifications, this study observes that domestic risk factors such as unemployment, inflation rates and industrial production growth emerged as significant for the NYSE-listed companies. As regard, the NASDAQ-listed ones, it was found that Libor and the G20 inflation rate were also affecting their stock returns.
Research limitations/implications
Companies examined are listed only in the US’s NYSE and NASDAQ. Hence, companies listed elsewhere were excluded. It may be concluded that these US exchange-listed companies abide mostly by domestic fundamentals and to some extent to selected global factors.
Practical implications
The significance of the findings in this study pertains to global investors and shipping companies’ managers alike. Specifically, given the differential sensitivities of the shipping companies to various risk factors (and the global business cycle, in general), it is possible to view the shipping companies’ stocks as a separate, alternate asset class in a global, well-diversified portfolio. Thus, such a broader portfolio would permit investors to earn positive returns and reduce overall risk. Managers of shipping companies would also benefit from the findings in this study in the sense that they should better understand the varying exposures of their companies to changing global and domestic macro conditions and successfully navigate their companies through business cycles.
Originality/value
Research on the global shipping industry has lagged behind and was mainly concentrated on the investigation of the sources of shipping finance and capital structure of shipping companies, investment and valuation, corporate governance and risk measurement and management. Empirical research on the potential micro and macro determinants of the stock returns of shipping companies, however, is scant. This paper fills the gap in the literature of identifying and evaluating the various macroeconomic, US and international risk, factors that affect shipping companies’ stock returns in a highly financially integrated world.
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The purpose of this paper is to investigate and clarify “irrationality” problem through the maritime industry practices and leading incentives behind common investors.
Abstract
Purpose
The purpose of this paper is to investigate and clarify “irrationality” problem through the maritime industry practices and leading incentives behind common investors.
Design/methodology/approach
This paper includes a review of broader business and economics literature; review of shipping business practices and detection of institutional pathways and misleading mechanisms behind the irrational preferences; investigation of data (for some arguments); and introduction of a theoretical approach.
Findings
There are several industry practices and norms well established and followed by decision makers, which may cause and initiate illogical and irrational (long-run) preferences. Short-termism is an erroneous habit of common shipping investors, which is embedded and forced through traditional financial math (i.e. discounted cash flow), financial system (e.g. initial public offerings with high-frequency transactions, interest rate governance and asset valuation mechanism) or flawed contracting tradition (i.e. commission bias).
Practical implications
Both shipping business and financial institutions need to redesign their working mechanisms, evaluation systems, risk detection and assessment procedures. As discussed in Section 4.7, commission-based (float) services must be converted to regular flat rate payments with long-term contracts to protect investors from rational choices of intermediaries in the short-run which encourages investor’s irrationality. Having a long-term service contract will also improve sustainability of intermediaries and lower their business risk (win-win).
Originality/value
The impact of this paper is two-fold. First, it raises critical questions about professional decay and drawbacks of some traditional instruments in the shipping business. For the first time, this paper emphasises on various challenges which deteriorate credibility of the industry and causes ill-defined investments. Some arguments have extreme priority for strengthening the foundations of the industry. Second, this paper establishes a new stream of scholarly research highlighting weaknesses of conventional economic approach and demand for outsourcing other schools of economics (e.g. institutional and behavioural) into the shipping business.
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Grace W.Y. Wang, Zhisen Yang, Di Zhang, Anqiang Huang and Zaili Yang
This study aims to develop an assessment methodology using a Bayesian network (BN) to predict the failure probability of oil tanker shipping firms.
Abstract
Purpose
This study aims to develop an assessment methodology using a Bayesian network (BN) to predict the failure probability of oil tanker shipping firms.
Design/methodology/approach
This paper proposes a bankruptcy prediction model by applying the hybrid of logistic regression and Bayesian probabilistic networks.
Findings
The proposed model shows its potential of contributing to a powerful tool to predict financial bankruptcy of shipping operators, and provides important insights to the maritime community as to what performance measures should be taken to ensure the shipping companies’ financial soundness under dynamic environments.
Research limitations/implications
The model and its associated variables can be expanded to include more factors for an in-depth analysis in future when the detailed information at firm level becomes available.
Practical implications
The results of this study can be implemented to oil tanker shipping firms as a prediction tool for bankruptcy rate.
Originality/value
Incorporating quantitative statistical measurement, the application of BN in financial risk management provides advantages to develop a powerful early warning system in shipping, which has unique characteristics such as capital intensive and mobile assets, possibly leading to catastrophic consequences.
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