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Capital allocation and ownership concentration in the shipping industry

Wolfgang Drobetz, Malte Janzen and Ignacio Requejo

Transportation Research Part E: Logistics and Transportation Review, 2019, vol. 122, issue C, 78-99

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; Investment; Ownership concentration; Firm value; Shipping firms (search for similar items in EconPapers)
JEL-codes: G01 G31 G32 L62 L91 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.tre.2018.09.010

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