Performance drivers of shipping loans: An empirical investigation

Abstract

Credit risk is a major issue for lenders and borrowers, threatening the reliability of global shipowners, who can identify credit risk factors on which to focus; and supply chain participants where unfulfilled bank financing can cause disruptions to their logistics operations.

Predicting corporate failure for listed shipping companies

“…This observation is also consistent with the previous literature, where profitability measures are inversely related to the probability of failure (e.g. Mitroussi et al, 2016). The sales/current assets ratio remains relatively stable for the active companies, while it reveals an increasing trend for the failed ones.…”

“…While issues such as corporate failure and financial performance have been extensively researched in the accountancy and finance fields, their consideration within the shipping industry has been limited. The spotlight has been on loans (Kavussanos and Tsouknidis, 2016;Mitroussi et al, 2012;, high-yield bonds (Grammenos et al, 2007; or IPOs (Grammenos and Papapostolou, 2012a). To date, no study has discussed the insolvency of shipping firms at a company level, leaving a significant research gap.…”

A survey of shipping finance research: Setting the future research agenda

“…The authors find that the most significant factors explaining bank loan defaults are industry specific and capture current and expected (forward-looking) conditions in freight markets, the risk appetite of shipowners proxied by the chartering policy employed, as well as a pricing variablethe arrangement fee over the amount of loan (see also, Chava and Purnanandam, 2011). In a similar study, Mitroussi et al (2016) utilize a logit credit scoring methodology to examine the performance risk drivers for a sample of 30 shipping bank loans for dry bulk vessels, during the period 2005-2009, and document that market conditions and chartering policy are important factors in determining the performance risk of shipping bank loans.…”

“…As shown in Figure 2, shipping bank loans have traditionally been the predominant financing source in the shipping industry, accounting for approximately 75% of the total ship-funding requirements during the period 2007-2017. The popularity of bank borrowings among shipowning companies can be explained by: (i) the lower cost and more readily available nature of bank loans which are highly desirable features among shipowners given the capital intensive nature of the business and the short-lived investment opportunities involved; (ii) relying on debt as a funding source does not affect the ownership structure of a shipping company, which is important given that shipping businesses are typically reluctant to endure significant changes in their traditional family oriented and highly concentrated ownership structures, (iii) raising funds through bank loans does not require the public disclosure of (confidential) strategic, financial and operational information, unlike for instance in IPOs and corporate bond issues (Kavussanos and Tsouknidis, 2014;; and (iv) historically, shipping bank loans have been granted on the basis of relationship banking, based on which a long-term rapport is established on amicable trust and information sharing between the obligor and the bank (Gavalas and Syriopoulos, 2014;Kavussanos and Tsouknidis, 2016;Mitroussi et al, 2016).…”

Financial risk assessment in shipping: a holistic machine learning based methodology

“…Earlier works have focused largely on financial performance predictor/feature selection, relying on, the more conventional, binary logistic regression techniques (Antoniou, A., A. Thanopoulos 1998;C. Th Grammenos, Nomikos, and Papapostolou 2008;Kavussanos and Tsouknidis 2016;Mitroussi et al 2016;Lozinskaia et al 2017). Moreover, research interest was either on shipping bond markets or bank shipping debt.…”