How strict lending rules affect the shipping industry, research proposal

Contents

Aims and Objectives of the Research. 1

Research questions. 1

Research hypotheses. 1

Background. 2

Research methodology. 2

Resources. 3

Timeframe. 3

Aims and Objectives of the Research

• To establish the effects of credit crunch on the shipping industry
• To establish the role of financial institutions in regulating the roles of the shipping industry
• To examine the impact of strict lending rules on the shipping industry
• To determine alternative sources of finance that support shipping industry players

Research questions

• What are the effects of global economic crunch on the shipping industry?
• What roles do financial institutions play in regulating the activities of the shipping companies?
• How do the strict lending rules impact on the shipping industry?
• What are some of the alternative sources of finance for the shipping industry?
• What is the impact of lack of rules in the industry?
• What are the gains of the rules to the stakeholders?
• What is the contribution of the shipping industry to the overall economy?

Research hypotheses

• Tighter lending rules have adverse effects on the shipping industry
• Banks and other financial institutions play a key role in regulating the activities of the shipping industry
• Shipping companies can survive without necessarily having to rely on banks for financial support

Background

The unprecedented financial crisis that hit the global economy has had an enormous effect on the shipping. The extent of the impact of tight lending and acquisition rules on the shipping industry will be determined by the actions of the banking industry which is a key player and a determinant in the success of the shipping industry. In particular the decisions of the banks that are concerned with the financing of the shipping industry are of more importance. Shipping industry has always been a capital intensive venture and as such has been very reliant on the banking sector to provide the hefty financial resources in order to operate successfully. Owing to the prevalent economic crises majority of the banks have found it necessary to revise their lending rules unfavorably not only for the shipping industry but also for all other economic industries that rely on their services.

Due to general good health of the market a since of confidence seems to be pulling players into public market spotlight. Steady maritime players continue to raise money on the equity and bond market, but the debates goes on as to whether the industry is best suited to be publicly or privet owned.

One factor to account for this is that it one of the cheapest means of transporting and that it is the most convenient means of transporting most of the bulk handled in the international trade. The industry will certainly slow down as it is being experienced presently but its recovery is guaranteed and this will be in line with the overall economic recovery of all other sectors of the economy which incidentally are indicators of the success of the shipping industry. For the time being contraction of the shipping industry is one sure thing and recovery is deemed to be the next to follow suit. The banking fiasco has revealed that global influences can impart negatively on the local shipping industry and therefore players in this sector must always be prepared for tough moments a head.

Morgan Stanley a blue chip investment banker back in 2006 moved into vessel ownership by buying out Heidmare, but it remains unclear whether that was a physical hedge against paper position or a genuine move into fleet building. It is remain to be seen in the future. Other owners were able to land a syndicated loan to expand their fleet.

After the collapse of the financial market shipping market started to feel the effect of stalled trading and none availability of cargoes due to none availability of credit into the economy things  started to look different a lot of ships were anchored waiting for employment , which eventually led to owners putting their ships to  lay-up and shipyards stop taking any new orders because owners getting worried and banks stopped giving any lending due to their own problems because of their involvement in sub-prime with the American banks.

Research methodology

Data on this research will be collected using questionnaires, and interviews. Questionnaires will be sent to different shipping companies as well as financial service institutions. The collected data will be input into the Statistical package for Social Scientists (SPSS) programme for both qualitative and quantitative analysis.

Resources

There has always been an interest in public markets both as a way of cashing out after a long period of building up a company or because the owner is persuaded it is the best way to raise more money for expansion. A huge bandwagon rolled towards the public market led by cheerleaders from the investment banking communities and media. It is true investment bankers will always bang the drums for equity markets because that is how they earn their fees. A steady number of companies, often Greeks have padded their way to Wall Street and raised money in the capital market. 

Timeframe