City Research Online

Abstract

This thesis attempts to identify factors that are important for shipping companies in tapping the capital markets for finance, either to raise equity or to issue debt in the high yield bond market. The analysis is carried out through the presentation of three research papers.

The first paper presents evidence for the first time on the aftermarket perfomance of 27 initial public offerings (IPOs) of common stock in the shipping industry worldwide, for the period 1987-1995. The portfolio of shipping IPOs in the sample underperforms the local stock market indices by as much as 36.79% by the end of their second anniversary of trading, but there is no evidence of underperformance in relation to the Morgan Stanley Capital International Shipping Index. Moreover, univariate regression analysis shows that two year holding period returns are positively related to the initial level of gearing and negatively related to the fleet age of the companies at the time of the offering.

The second paper examines for the first time the relationships between a prespecified set of global macroeconomic risk variables and shipping stock returns internationally. The sample consists of 36 companies that are listed in 10 stock exchanges around the world and the analysis concentrates in the period December 1989 - March 1998. The macroeconomic factors included in the analysis are the returns on the world equity market portfolio, and innovations in a prespecified set of global macro variables, namely, industrial production, inflation, oil prices, US dollar exchange rates, and laid up tonnage. Oil prices and laid up tonnage are found to have a negative effect on shipping stocks, whereas the exchange rate variable has a positive effect. In addition, it is found that, in general, the effects of macroeconomic factors exhibit a consistent pattern in the way in which they affect the shipping industry, across countries.

The third paper examines for the first time the primary pricing of shipping high yield bonds. This is performed by testing for the relationships between the following factors and the new issue spread of 30 high yield bond offerings issued by shipping companies in the US market, during the period 1993-1998: rating, callability, term, float, default rate, security status, 144A status, gearing, laid up tonnage and fleet age. Findings of the paper are that shipping high yield bonds carry wider spreads, the lower the rating of their issue, the higher their gearing levels, and the higher the laid up tonnage for the two months preceding the issue. Moreover, here is a statistically significant increase in explanatory power arising from the inclusion of gearing and laid up tonnage in the estimation, suggesting that rating agencies have not fully incorporated the potential effects of these variables, as credit risk factors.

Publication Type:	Thesis (Doctoral)
Subjects:	H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management H Social Sciences > HE Transportation and Communications
Departments:	Bayes Business School > Finance Doctoral Theses Bayes Business School > Bayes Business School Doctoral Theses

Export

Downloads