The 2008 Financial Crisis Impact on Capital Structures Within the Shipping Industry

Sammanfattning: The shipping industry has traditionally relied on bank loans as a source of financing but the Great Recession resulted in many banks having to exit the market. This study investigates the impact of the 2008 Financial Crisis on the determinants of capital structures within the shipping industry and how this can be explained by established financial theories. A multiple OLS regression is run on 42 globally listed shipping companies between 2003 and 2015. Dummies are used to separate the regression into before-, during- and after the crisis, as well as fixed effects being included to control for omitted variables constant across countries. The results show an increasing significance in the determinants after the crisis, suggesting how increased uncertainty about a company's survivorship resulted in more firm-specific factors being considered when determining financing structures. Moreover, the capital-intensive nature of the industry, along with its historically high leverage, suggests that capital structure choices within the industry can be better explained by the trade-off theory. Consequently, the two most fundamental factors explaining capital structures in the shipping industry are the relationship between the costs and benefits of debt and the availability of financing sources, determined by the market's opinion of the industry.