1. Introduction
The international shipping industry represents the largest logistics provider in the world. Approximately 80% of global freight is carried by sea, and the industry serves as a crucial link in global supply chains and grants countries access to international markets [
1]. The United Nations (UN) [
1] projected that the global maritime trade would grow by 3.5% annually from 2019 to 2024, eventually carrying 11 billion tons of goods. Approximately one-third of trade is on oil, gas, and petroleum products, and the remaining two-thirds of trade is on commodities (iron ore, coal, and grain) and merchandise. Therefore, the provision of global food, raw materials, and energy heavily depends on international shipping, which continues to bolster the world economy.
The shipping industry has attracted investor attention because of its rapid growth relative to global production [
2]. Grelck et al. [
3] observed that investors earned a higher rate of return when their investment portfolios included the stocks of international shipping companies. This finding indicated that investors might benefit from diversifying their investment portfolios by investing in shipping stocks.
However, researchers have regarded sustainability to be a point of weakness for the shipping industry; this is because shipping companies must balance concerns regarding financial volatility, environmental impact, social responsibility, and long-term financing [
4,
5,
6,
7,
8]. Prior studies used mostly financial performance to indicate the tangible value of the international transportation industry [
9,
10]. However, governments around the world have required listed companies to fulfill their responsibilities for the environment and society. In 2019, the worse global event affecting the developed and developing economies was the coronavirus disease (COVID-19) broke out. In March 2020, the global stock markets declined by 25% to 30%. The shipping companies’ stock prices turned volatile during the 2020–2021 COVID-19 period. The global shipping companies faced a serious problem of maintaining their shipments on schedule due to the spread of the coronavirus. Prior studies rarely discuss the key factors that could help the global shipping companies stay sustainable during COVID-19 with the increasing demand for their social role.
Based on the literature, the sustainability of global shipping companies is affected by four dimensions. First, tangible financial indicators measure sipping companies’ business sustainability, which is mostly a concern for investors. Common financial indicators include return on equity (ROE) and earnings per share (EPS). However, the sustainability and growth potential of shipping companies do not only rely on the common financial indicators for investors but also on these companies’ abilities to sustain themselves through external funds during the difficult time of COVID-19.
Second, financial institutions tend to reduce loans for shipping companies during the COVID-19 crisis. Therefore, the ability of global shipping companies to raise funds in the capital markets determines the scale of future fleet expansion. Bonds are a crucial way of financing global shipping companies, with bond financing subject to the following four criteria: the term to maturity, yield to maturity, credit rating, and bond market value [
11,
12]. These criteria for bond financing received little attention before the COVID-19 crisis, despite the need for financing and fleet expansion to increase shipping companies’ cash flows in the future. However, investors around the world began to value socially responsible investment (SRI), which considers not only financial returns but also companies’ environmental and social impact.
Third, governments worldwide demanded listed companies to comply with the environmental, social, and governance (ESG) regulations, which implied additional costs for these companies. Although shipping companies must disclose their costs of operations, the costs related to ESG practices may be hidden and underestimated [
13]. From the environmental perspective, shipping companies may replace older ships relying on high-pollution heavy sulfur oil with new ones operating on desulfurized oil [
13]. In addition, shipping companies may renovate poorly maintained crew quarters to avoid cross-infection of COVID-19 among crew members sharing the same room [
14,
15]. From a social perspective, shipping companies can strengthen safety measures to protect their crew members [
15]. From the governance perspective, shipping companies may elect professional independent directors to replace family members to improve corporate governance [
16].
The ESG practices become increasingly important during the COVID-19 period [
17]. A number of measurable factors influence shipping companies’ performance, such as the presence of confirmed cases of COVID-19 among dockers and the occurrence of technical/human error (e.g., when the giant Evergreen container ship blocked the Suez Canal in March 2021), which lead to increased costs and freight rates [
17]. In addition, further ESG enforcements planned by governments around the globe in 2022 tend to increase shipping companies’ operating costs. For instance, major international ports plan to restrict the entry of ships fueled with heavy sulfur oil in 2022 [
18,
19,
20]. Thus, investors may forego shipping companies with weak ESG compliance and implementations [
18]. In contrast, some shipping companies can profit from the pandemic by raising the freight rates in response to the tremendous increase in online purchases due to the COVID-19 lockdowns. Thus, this study addresses this neglect of ESG factors in the literature by identifying the essential criteria for the ESG dimension that affect the performance of shipping companies during the 2019 to 2020 period of the COVID-19 pandemic from an investor’s perspective.
Fourth, shipping companies often face adverse events on land and sea. The COVID-19 pandemic often prevented shipping companies from transporting goods on schedule. These companies coped with such challenges by developing proactive measures such as formulating emergency response plans, protecting employee safety, and ensuring timely delivery during the COVID-19 pandemic [
21,
22,
23]. For example, the managers of shipping companies enlarged the distance between the beds in the crew dormitory, ensuring that each crew member had his or her own living space to prevent the spread of infection. During the pandemic, when an individual was detected with COVID-19, the shipping companies would ferry the entire crew back to their previous ports of call as rapidly as possible. Such practices increased operating costs and oil expenses and thus decreased corporate earnings. However, if a crew member is infected, the ship must return to its previous port of call to exchange crew members, which may negatively affect the cost of navigation and timeliness of delivery. The ship may then be delayed and must increase its speed for unloading to occur on the specified date, thereby driving up the fuel cost. During the COVID-19 period, these factors affecting costs were not reflected in the financial statements, obscuring the reality of the situation.
Moreover, undertaking these plans and actions lead to companies outperforming their rivals in the financial results during the next quarter. In addition, if an international shipping company has more effective emergency response plans for managing port congestion and infections among dock workers, it is likely to be more competitive, earn more revenue, and results in lower ship usage turnover rates, all of which improve cash flow and financial performance and allow the company to become a more attractive target for investment.
Prior studies mainly invested the impact of corporate social responsibility (CSR) on shipping companies and compared the financial performance and efficiency of the three shipping segments (tankers, dry bulk, and container) [
15,
16,
24,
25,
26,
27]. These studies primarily used ROE, return on assets (ROA), and operating income to measure the financial performance of the shipping companies. However, shipping companies have faced the challenge of sustainability from multiple perspectives, which leads to research gaps. For example, governments around the world urged all listed companies to implement ESG practices. In addition, the shipping companies found it difficult to receive bank loans after the 2008 global financial crisis. The recent 2020–2022 COVID-19 pandemic required shipping companies to cope with the obstacles of transporting goods. Therefore, evaluating global shipping companies from one perspective seemed to be inadequate. This study bridges the research gaps not only by adopting four dimensions and 20 criteria but also by suggesting areas for improvement, thus providing a holistic view of the global shipping industry.
The purpose of this study is to identify the key factors from four dimensions (financial performance, bond financing, ESG, and COVID-19) and twenty criteria affecting the sustainability of global shipping companies, thus ranking these companies based on performance gaps. Based on the Delphi method described by [
28], we surveyed 15 investment experts and collected the data of nine international listed shipping companies headquartered in Europe, Asia, and the U.S.A from 2010 to 2020. These nine large shipping companies account for nearly 49% of the global market share in terms of market capitalization, with seven of them ranked among the top 10 shipping companies in the world. We applied a hybrid multiple criteria decision (MCDM) model integrating the Decision-Making Trial and Evaluation Laboratory (DEMATEL) method, analytic network process (ANP), and modified VlseKriterijumska Optimizacija I Kompromisno (VIKOR) techniques, known as the DANP-mV model to analyze the collected data [
29].
This study contributes to the shipping industry literature in three ways. First, we developed four dimensions and twenty criteria to include both quantitative and qualitative indicators to analyze the data, thus providing a holistic view of the shipping companies. Second, we applied a hybrid MCDM model named the DANP-mV model to the data. This novice model not only identifies the causality of the four dimensions and 20 criteria but also computed the gap of each shipping company from its actual to the aspiration (ideal) level based on all four dimensions and 20 criteria. Third, we are among the first researchers to examine the effect of the 2019–2021 COVID-19 pandemic on the global shipping industry. Thus, we can rank the nine shipping companies based on their performance gaps considering the challenging COVID-19 crisis. These findings benefit both managers in improving their performance and investors who are considering incorporating shipping companies’ stocks into their portfolios.
The findings of this study indicate that financial performance is the most influential dimension regardless of the increasing importance of ESG, implying that greater financial performance enables shipping companies to cope with the COVID-19 pandemic better. The COVID-19 pandemic is the second most influential dimension that affects the ESG and bond financing, suggesting that the pandemic puts shipping companies under pressure to implement ESG practices and bond issuance. Lastly, the ESG dimension affects bond financing, indicating that shipping companies with ESG initiatives can attract more bond investors.
The remainder of this paper is structured as follows.
Section 2 presents a literature review and develops dimensions and criteria affecting the global shipping industry.
Section 3 details the data and model.
Section 4 provides the empirical results and a discussion of the implications.
Section 5 concludes the study, explains the limitations and suggests future studies.
5. Conclusions
The global shipping industry represents the largest provider of transportation in the world. Thus, the stocks of shipping companies allow investors to diversify their investment portfolios. However, the global shipping companies face the issue of sustainability from multiple perspectives. The literature mostly examined the shipping companies through financial performance and freight rates while neglecting the increasing importance of the qualitative factors such as social welfare, environmental impact, and corporate governance. Moreover, during the 2020–2021 COVID-19 pandemic, the global shipping companies faced unprecedented challenges such as seafarers’ infections and delivery delays. A research gap, therefore, existed as prior studies rarely analyzed the global shipping companies from qualitative factors in addition to quantitative ones involving financial performance, thus unable to provide a holistic view regarding the sustainable attainment of the global shipping companies.
The purpose of this study is to identify the key factors affecting the sustainability of the global shipping companies from four dimensions and twenty criteria using a hybrid MCDM method named DANP-mV. The four dimensions include financial performance that determines business sustainability, bond financing that provides long-term funds, ESG regulations that strengthen corporate governance, social and environmental enhancement, and COVID-19 caused port congestions and delays in shipments. We analyzed survey responses from fifteen investment experts and the data of nine international shipping companies from 2010 to 2020. The novice DANP-mV model determined the causal relationships among the four dimensions and twenty criteria, suggesting ways in which each shipping company can narrow its performance gap between the actual and inspiration levels in each dimension.
The empirical results of this study validated H1 and H4. Specifically, H1 financial performance is the most significant dimension, followed by H4 COVID-19. The dimension of financial performance directly influences the dimension of COVID-19. Financial performance and COVID-19 influence ESG, which in turn affects bond financing. These findings are consistent with the extant literature that financial indicators are mostly scrutinized by equity and bond investors and that shipping companies need to respond to emergencies rapidly [
19,
21]. Although ESG has gained increasing importance in the literature, it is regarded as less crucial compared to financial performance and emergencies such as the COVID-19 [
18,
36,
50]. The outcome of this study suggests that shipping companies with higher financial performance can better cope with the negative effects of COVID-19. Therefore, investors can reasonably assume that shipping companies with better financial performance are more likely to succeed during the COVID-19 pandemic. The higher financial performance also helps shipping companies implement ESG practices. Similarly, by increasing ESG activities, shipping companies are likely to attract more investors to favor their bonds, which provides a long-term and stable source of funds. Thus, investors may presume that shipping companies with more ESG compliance are capable of raising more funds through bond issuance in the long run.
Within the dimension of financial performance, gross profit margin is the main cause rather than the commonly mentioned ROE in the literature [
18,
19,
20]. Gross profit margin affects operating profit margin, EPS, and finally, ROE. This result is consistent with Markowitz [
30] and Sroufe and Goalakrishna-Remani [
36] that profitability is the key to measuring firm performance. The largest performance gap across all shipping companies is EPS. The results of this study further highlight that by improving gross profit margin, shipping companies can improve EPS.
Within the dimension of bond financing, term to maturity is the main cause affecting yield to maturity, bond market value, and credit rating. This result is contrary to the literature that credit rating plays the most important role [
22,
23] and consistent with prior researchers who claimed high yield-to-maturity entails higher returns for investors [
41]. The result of this study suggests that by setting an appropriate term to maturity, shipping companies may increase yield to maturity, which poses the largest gap between the actual and aspirational levels across all shipping companies.
Within the dimension of ESG, board size is the main cause affecting the environmental factors, such as a reduction in CO2 and air pollution, as well as governance factors such as the proportion of independent directors. Subsequently, the environmental and social factors affect the social factors such as employee safety and training. Such results correspond to Alexandridis et al. [
19], who claimed that corporate governance offers the legal and institutional mechanism that aligns the interests of managers and shareholders. On the contrary, CSR leads to the largest performance gap across all shipping companies. Thus, the outcome of this study indicates shipping companies may narrow their performance gap in CSR by enlarging the board size and diversity.
Within the dimension of COVID-19, social distancing is the main cause affecting emergency response plan, employee safety, and timely delivery. Such findings are inconsistent with the literature that an emergency response plan is most important to fight the COVID-19 pandemic [
58]. On the other hand, employee safety and timely delivery represent the largest performance gap across all shipping companies. The result of this study suggests that shipping companies must first strictly enforce social distancing policy in an aim to achieve employee safety and timely delivery, preventing disruptions of shipping business sustainability during the COVID-19 period.
Because the sample of nine shipping companies accounted for 49% of the global market share in terms of market capitalization, the results of this study can be generalized. Three broad implications drawn from the findings of this study can be applied to the global shipping industry. First, the global shipping companies may focus on financial performance, particularly gross profit margin, to better cope with adverse events, such as the COVID-19 pandemic. Second, shipping companies that implement the ESG practices may attract more bond investors, thus increasing bond financing. Third, equity investors should continue to focus on the financial performance of the shipping companies when selecting stocks because these shipping companies tend to outperform their rivals in the areas of sustainability, such as ESG and financing.
Moreover, we ranked the nine companies based on the overall performance gap in the four dimensions. The shipping companies that had smaller gaps between their actual level and aspiration level outperformed those with larger gaps between these levels. Thus, this analysis identifies the global shipping companies that are most likely to attain sustainability and worth investing in. We recommend Shipping Company A, B, and C to investors. In addition, investors are advised to focus on the financial performance and on proactive and reactive measures executed by shipping companies in response to COVID-19 when selecting shipping stocks.
This study was limited primarily by the timing of the distribution of the survey questionnaires. The experts received the surveys in 2020, slightly more than 1 year after the first COVID-19 outbreak. If the survey participants had received the surveys at a later time, they could have provided greater insight into the effect of the COVID-19 pandemic. Hence, future research could examine the strategies formulated by shipping companies in response to the COVID-19 crisis. Moreover, researchers could compare the practices of shipping companies before, during, and after COVID-19.