Predicting corporate failure for listed shipping companies

The shipping industry has unique financial characteristics: it is capital intensive, faces highly volatile freight rates and ship prices, and exhibits strong cyclicality and seasonality. It is a sector which has a unique corporate structure, as it is normally highly geared and relies extensively on...

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Bibliographic Details
Published in:Maritime economics & logistics 2019-09, Vol.21 (3), p.415-438
Main Authors: Haider, Jane, Ou, Zhirong, Pettit, Stephen
Format: Article
Language:English
Subjects:
Business and Management
Companies
Corporate structure
Debt financing
Failure
Finance
Financing
Industry
Instruments
Logistics
Model accuracy
Operations Management
Original Article
Seasonal variations
Seasonality
Shipping
Shipping industry
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Summary:The shipping industry has unique financial characteristics: it is capital intensive, faces highly volatile freight rates and ship prices, and exhibits strong cyclicality and seasonality. It is a sector which has a unique corporate structure, as it is normally highly geared and relies extensively on debt financing. Shipping is also a conservative sector favouring traditional finance and tapping the global capital market much later than other industries. In this sense, the shipping industry deserves its own enquiry into its financial characteristics. This paper considers listed shipping companies worldwide in terms of their overall financial performance. While default against individual financial instruments can represent early phases of corporate failure, predicting overall failure at the firm level is worth investigating. This paper studies corporate failure and financial performance in globally listed shipping firms, examining the different characteristics of financial risks, and investigating how these characteristics vary over time. A new technique, the receiver-operating characteristic curve, is introduced to compare the overall accuracies of various models for predicting binary outcomes. The findings in respect of shipping finance for listed shipping companies can benefit both shipowners and investors.
ISSN:1479-2931
1479-294X
DOI:10.1057/s41278-018-0101-4