Risk sentiment and strategic decision-making in NYSE-listed shipping companies: analyzing chartering policies and vessel investment

Abstract

This study investigates how risk sentiment influences the chartering policies and sale & purchase decisions of New York Stock Exchange (NYSE)-listed shipping companies, addressing two core questions: the effects of risk preferences and sale & purchase activities on chartering policies, and how these chartering policies and risk sentiment impact vessel acquisition and divestment. Using panel data from 2014 to 2023, two regression models analyze the relationships between risk sentiment indicators and various financial metrics representing chartering policies and sale & purchase investments. Risk sentiment is quantified in both models by counting occurrences of risk-related words in annual reports. Model 1 assesses the influence of risk sentiment and asset sale & purchase policies on chartering deployment, with sub-models covering time charters, voyage charters, and pool management. Model 2 examines the impact of chartering revenue and risk sentiment on vessel ownership decisions, with sub-models representing asset purchases, asset sales, and fleet size. Improved versions of both models were developed to enhance analytical clarity by accounting for firms without pool management income, using time charter revenue percentage and voyage charter revenue percentage to represent distinct chartering strategies, and the annual vessel count to represent investment strategy. Results indicate that firm size and leverage ratio significantly influence chartering revenue and vessel ownership, with larger and more leveraged companies more likely to engage in long-term charters and fleet expansion. The findings underscore the role of risk sentiment in moderating these effects, with higher risk sentiment aligning with conservative investment and chartering strategies. This study provides insight into the strategic factors driving chartering and investment decisions in a high-risk industry.