Capital Allocation and Ownership Concentration in the Shipping Industry

54 Pages Posted: 17 Feb 2018 Last revised: 9 Jan 2019

See all articles by Wolfgang Drobetz

Wolfgang Drobetz

University of Hamburg

Malte Janzen

University of Hamburg

Ignacio Requejo

University of Salamanca - Administration and Business Economics

Date Written: January 28, 2018

Abstract

We measure the sensitivity of investment to changes in investment opportunities in the shipping industry and test whether this relation is moderated by ownership concentration. For a sample of 126 globally listed shipping firms, we find that investment in commercial shipping follows freight rates, a measure of the potential income stream from owning a vessel. Ownership concentration, measured as the ownership stake of the largest shareholder, reinforces the positive effect of freight rates on investment, indicating a higher relative efficiency of capital allocation. The positive impact ownership has on the investment-freight rate sensitivity also translates into higher firm value. An analysis of investor identity shows that our results are driven by the group of firms where the largest owner is a financial investor, who is usually more focused on shareholder value maximization.

Keywords: Capital Allocation, Corporate Investment, Shipping Firms, Ownership Concentration, Firm Value

JEL Classification: G01, G31, G32, L62, L91

Suggested Citation

Drobetz, Wolfgang and Janzen, Malte and Requejo, Ignacio, Capital Allocation and Ownership Concentration in the Shipping Industry (January 28, 2018). Available at SSRN: https://ssrn.com/abstract=3119072 or http://dx.doi.org/10.2139/ssrn.3119072

Wolfgang Drobetz (Contact Author)

University of Hamburg ( email )

Moorweidenstrasse 18
Hamburg, 20148
Germany

Malte Janzen

University of Hamburg ( email )

Moorweidenstraße 18
Hamburg, 20148
Germany

Ignacio Requejo

University of Salamanca - Administration and Business Economics

Campus Miguel de Unamuno
Salamanca, ES-37007
Spain

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