Assessing the financial performance of container shipping companies

Abstract

The objective of this research paper is to determine if vertical integration improves the financial performance of container shipping companies, by comparing various financial indicators of the firms prior to and after vertical integration. Five companies were shortlisted from the top 30 container shipping lines, where trends and changes in five selected indicators were analyzed over a specified timeframe before and after integration.

It was observed that the financial health of the companies prior to vertical integration, whether good or poor, had no impact on their decision to vertically integrate, as there was no apparent trend in their financial performance before integration took place. However, the selected companies performed better within 3 years of vertical integration, as supported by improvements in the 5 financial indicators. In addition, it was noted that there appeared to be a link between the size of the company and the number of years it took for financial performance to pick up – in general, larger companies experienced improvements within a shorter time period after vertical integration.

This study has indicated that there is no significant correlation between vertical integration and improvement in the financial performance of the shipping companies, due to a lack of substantive evidence supporting such a direct link. However, it was found that there were other non-financial factors that motivated container shipping companies to vertically integrate, for example the concept of supply chain management, which is gaining popularity in recent years.