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The relative efficiency and financial risk assessment of shipping companies

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  • Grace W.Y. Wang
  • Su-Han Woo
  • Joan Mileski

Abstract

Since shipping companies are highly competitive, we ask whether financial risk assessment tools impact company performance and, therefore competitiveness and efficiency. Stochastic Frontier Analysis (SFA) is used in the evaluation. Based on distinct features of the risk-return relationship, three cargo segments in the shipping industry are studied-dry bulk, liquid bulk, and containerized cargo. The influence of the risk assessment indicators on market and operational efficiency is subsequently determined using a panel regression to determine whether different asset allocation and risk management techniques improve the performance of shipping companies. In this analysis, 79 international shipping companies listed in Bloomberg Shipping Indices are included in the data collected from Thomson One for the period of 2001-2010. Efficiency estimation from the SFA shows that containerized cargo firms have better performance in both market and operating efficiencies. Operating efficiency performance is achieved by lowering liquidity. Market efficiency is improved by well-managed leverage level.

Suggested Citation

  • Grace W.Y. Wang & Su-Han Woo & Joan Mileski, 2014. "The relative efficiency and financial risk assessment of shipping companies," Maritime Policy & Management, Taylor & Francis Journals, vol. 41(7), pages 651-666, December.
    • Handle: RePEc:taf:marpmg:v:41:y:2014:i:7:p:651-666
    DOI: 10.1080/03088839.2013.873546
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    3. Gong, Xiaoxing & Wu, Xiaofan & Luo, Meifeng, 2019. "Company performance and environmental efficiency: A case study for shipping enterprises," Transport Policy, Elsevier, vol. 82(C), pages 96-106.
    4. Wenming Shi & Kevin X. Li, 2017. "Themes and tools of maritime transport research during 2000-2014," Maritime Policy & Management, Taylor & Francis Journals, vol. 44(2), pages 151-169, February.
    5. Su-Han Woo & Min-Su Kwon & Kum Fai Yuen, 2021. "Financial determinants of credit risk in the logistics and shipping industries," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 23(2), pages 268-290, June.
    6. Dong-Joon Kang & Su-Han Woo, 2017. "Liner shipping networks, port characteristics and the impact on port performance," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 19(2), pages 274-295, June.

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