Capital structure : an analysis of the shipping market

Abstract

Capital structure in shipping has proven to be complex. The market is known for high volatility and the financial funding alternatives have changed as a result of these cycles. This master thesis introduces the shipping market with focus on the dry bulk and tanker segments. It then discusses capital structure theory and relates it to shipping. These theories form the basis of the analysis. Evaluating the segments does not give a clear answer to the best way of financing given the market conditions. However, it seems like the industry prefer owning vessels instead of leasing and the average debt-equity market ratios have been quite low and stable between 2005 and 2010. Both segments have experienced a reduction of ROE and ROIC to approximately the same values as in 2002. The expected increase in fleet size implies that calmer seas will not be reached in the near future.