Financing Shipping Companies and Shipping Operations: A Risk‐Management Perspective

15 Pages Posted: 22 Dec 2011

See all articles by Stefan Albertijn

Stefan Albertijn

affiliation not provided to SSRN

Wolfgang Bessler

Justus-Liebig-University Giessen

Wolfgang Drobetz

University of Hamburg

Date Written: Fall 2011

Abstract

Shipping has always been a volatile and cyclical business. The extreme changes in revenues, operating cash flows, and asset values during the recent financial crises have upset the usual means of financing shipping companies. While bank debt will remain important in the future, the new regulatory environment has been forcing shipping banks to shift these risks from their balance sheets to capital markets through instruments such as loan securitization. As a result, the shipping industry will increasingly look to capital markets for external funds. And shipping banks are likely to change from being commercial bank lending institutions to becoming more like investment banks that arrange a variety of financing solutions, including high yield bonds or public equity. Risk management will be central to shipping companies in this new environment. Shipping companies can manage their own risks by modifying operations, employing freight and vessel price derivatives, or adjusting their capital structures. To arrive at the value‐maximizing combination of these three basic methods, they must decide which risks to bear, which to manage internally, and which to transfer to the capital markets. These decisions require shipping financial managers to assess the effect of each risk on firm value, understand how each contributes to total risk, and determine the most cost‐effective way to limit that risk to an acceptable level.

Suggested Citation

Albertijn, Stefan and Bessler, Wolfgang and Drobetz, Wolfgang, Financing Shipping Companies and Shipping Operations: A Risk‐Management Perspective (Fall 2011). Journal of Applied Corporate Finance, Vol. 23, Issue 4, pp. 70-82, 2011. Available at SSRN: https://ssrn.com/abstract=1975684 or http://dx.doi.org/10.1111/j.1745-6622.2011.00353.x

Stefan Albertijn (Contact Author)

affiliation not provided to SSRN

No Address Available

Wolfgang Bessler

Justus-Liebig-University Giessen ( email )

Center for Finance and Banking
Licher Strasse 74
Giessen, D-35394
Germany
49-641-9922460 (Phone)
49-641-9922469 (Fax)

HOME PAGE: http://wiwi.uni-giessen.de/home/Bessler/

Wolfgang Drobetz

University of Hamburg ( email )

Moorweidenstrasse 18
Hamburg, 20148
Germany

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
8
Abstract Views
1,748
PlumX Metrics