Optimal capital structure of deep sea foreign freight transportation companies

Abstract

This thesis aims to understand the optimal leverage range for shipping companies (maritime foreign freight transportation companies - SIC 4412), through data analysis. This study confirms that in a traditional industry like shipping, the Market value-leverage curve is very similar to the theoretical curve, as proposed by traditional capital structure theories. In comparison to other industries, the trend shows that there is allowance for more debt in shipping, since the optimal capital structure is reached in relatively higher values. Between shipping companies, the study shows that the most definitive factor in determining the optimal leverage is the company type (type of ships owned), and somewhat the year range the company operated. Contrary to other industries, company size does not seem to play a major role in shipping. Data analysis using pure plays (groups of very similar companies) reels trend lines with higher accuracy, indicating the optimal leverage range of certain types of shipping companies. The most consistent result is that for tanker shipping companies, where the optimal leverage range is 65-75%.