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Publication Ownership concentration, investment, and firm value in the shipping industry

Type

Working Paper

Institution(s)

University of Hamburg, University of Salamanca

Year

2018

Author(s)

Wolfgang Drobetz,  Malte Janzen, Ignacio Requejo

Research Area

Corporate Finance, Ship Finance

Keywords

Capital allocation, Corporate investment, Shipping firms, Ownership concentration, Firm value

Abstract

We study the efficiency of capital allocation in shipping firms and test whether it is affected by ownership concentration in these companies. For a sample of 126 globally listed shipping firms over the period 1997 to 2016, we find that investment in the commercial shipping sector follows freight rates, an indicator of the potential income from owning a vessel. We show that ownership concentration, measured as the share of ownership held by the largest owner, amplifies the positive effect of freight rates on investment, indicating a higher efficiency of capital allocation. Our results are not driven by overinvestment as firms with concentrated ownership structures also show stronger reduction of investment when freight rates are low. We further show that ownership concentration positively affects firm value. An analysis of investor types reveals that our results are explained by the group of firms where the largest owner is a financial investor.

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