Determinants of Capital Structure for Oil Tanker Shipping Companies : An Empirical Study

Abstract

Tanker shipping is the primary means of transporting crude oil, which is a necessary energy source for modem society. As a result, the oil tanker shipping industry has grown to be a vital link in the worldwide economy. The crude tanker sector is a capital-intensive industry, and the choices of capital structure of tanker firms directly impact their operating performance and future development. Therefore, examining the determinative elements of capital structure is valuable for oil tanker enterprises. By combining the current state of the global oil tanker industry with the characteristics of the capital structure of shipping enterprises, this thesis conducts an empirical study of the elements that decide the capital structure of an oil tanker company based on the relevant capital structure theories. We used the firm fixed effect panel regression method to generate results by selecting the financial data of 14 listed tanker companies from 2000 to 2021 and the relevant shipping statistics as samples, we also combined some latest data to present the condition of the entire tanker industry. According to our research, the oil tanker firm's capital structure is mainly determined by size and nondeductible tax shield. Debt ratios have a positive relationship with Size, while a negative relationship with Nondeductible Tax Shield. However, the BDTI index and Asset Tangibility have not had any effect upon the capital structure of oil tanker enterprises. We also demonstrate that Efficiency has a positive association, while Profitability and Z-score are adversely correlated with total and longrun debt level but barely affects short-run debt level. Moreover, Liquidity has an adverse connection with total and short-run leverage. We especially discover that Growth has an effect upon oil tanker shipping companies' short-term debt level and the direction is positive. We also identify some industrial elements, such as Oil Price and Orderbook-to-Fleet Ratio are necessary to be considered. Our research about the capital structure of oil tanker enterprises addresses a gap within the previous knowledge, meanwhile validating and complementing existing determinative elements of capital structure for the shipping industry. Core findings have guiding significance for decision-making related to the capital structure of oil tanker shipping companies.