Abstract/Summary

This thesis provides a comprehensive understanding of corporate financial management in the shipping industry by conducting three in-depth analyses on shipping finance. The first analysis is focused on the relations between capital structure and inorganic investment decisions in the shipping industry by utilising a series of state-of-the-art methods. The study reveals how financial leverage has an impactful effects on shipping companies’ Mergers and Acquisitions (M&As) decisions. Deviations from target leverage display a strong association with the probability of being an acquirer, while deal size, method of payment and deal outcomes are strongly affected. Excessive debt in the financing mix decreases the likelihood of consummating acquisitions but increases the deal quality, indicating direct policy implications for several actors in the shipping industry. The second analysis regards the interactions between investment, financing, and payout choices in the shipping industry. The study highlights the importance of utilising a correct methodology when explaining the relations between the three important corporate policies. Failing to consider the endogeneity and simultaneity leads to a severe underestimation of the co-determination of investment, financing, and payout. Simultaneous equations approach is found to be the best approach to unearth the relations, while financial constraints and the phases in the shipping cycles cause significant divergences in how the three corporate decisions interact with one another. The co-determination of corporate decisions in shipping companies is found to be much more pronounced, emphasising how capital intensiveness and high debt reliance can expose significant interactions between investment, financing, and payout. The third analysis revisits the acquirer returns in the shipping industry by taking aggregate funding conditions into account. The study begins by investigating how different phases of aggregate IV funding conditions affect the deal quality in the shipping industry. The acquirer returns are found to be decreasing with improving funding conditions, implying that shipping companies are less cautious in selecting targets in favourable funding conditions. However, industry-level earnings seem to significantly moderate the negative relationship, emphasising the impact of a positive shock to the industry on the M&As market in the shipping industry. Shipping M&As are found to be vulnerable to global economic policy uncertainty along with favourable funding conditions, implying that M&A returns are hampered by uncertainty. However, M&A record and free cash flow (FCF) levels seem to have a positive impact on M&A returns in accommodative funding environments.