Abstract
The international transportation industry involves various sectors, shipping being one with particular characteristics which differentiates it from others especially as relevant capital risk is concerned. Within this scope, shipping banks are required to assess a number of factors in order to limit the risk from loans, considering the investment capital required. The efficiency of shipping banks is particularly important as it may affect the borrowing level and consequently the financial situation and investment activity in shipping market. This paper examines the Technical Efficiency (TE) of 71 banks operating world-wide in the maritime sector from 2005 to 2010, which is the period that the shipping industry reached its peak and one of its lowest point, making extremely difficult to secure debt finance in shipping, by using Data Envelopment Analysis (DEA) and presents the factors which may affect their technical efficiency, through the application of Regression Analysis. Based on the paper results, most banks during the study period are technically inefficient, whereas TE is proved to be higher under the assumption of variable returns to scale (VRS DEA model) when comparing to constant returns (CRS DEA model). Statistically significant variables are total deposits and total assets for both TE-CRS and TE-VRS and ROE (Return On Equity) for TE-VRS, providing significant information regarding factors on which management should further focus, in order to maintain and reinforce technical efficiency with respect to their strategy for financing shipping sector.
Highlights
This paper examines the Technical Efficiency (TE) of 71 banks operating worldwide in the maritime sector from 2005 to 2010, which is the period that the shipping industry reached its peak and one of its lowest point, making extremely difficult to secure debt finance in shipping, by using Data Envelopment Analysis (DEA) and presents the factors which may affect their technical efficiency, through the application of Regression Analysis
Based on the paper results, most banks during the study period are technically inefficient, whereas TE is proved to be higher under the assumption of variable returns to scale (VRS DEA model) when comparing to constant returns (CRS DEA model)
This paper reveals for the first time the most important factors arising from shipping bank’s internal environment based on DEA and implicitly contributes to the development of a specific methodological tool for measuring technical efficiency with respect to bank ability to produce optimal output from a given set of inputs
Summary
Sambracos from all other international transport industries, forming a dynamic environment with high risks of investment capital losses In this context, the commercial banks, as the primary source of financing a market characterized by high capital and operating costs, play a leading role. They are required to evaluate a broad range of different factors in order to limit the relevant risk and reach an efficient risk-yield balance. This becomes even more important when seen in the context of the latest international developments following the implementation of the Rules of Basel ΙΙΙ in combination with the capital lost due to one of the most prolonged downturns in the shipping market
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