Investigation of bankruptcy in shipping industry - liner shipping

• Main Author: Lau, Rui Wen
• Other Authors: Chiu Sai Hoi, Benson
• Format: Final Year Project
• Language: English
• Published: 2018
• Subjects: DRNTU::Engineering::Maritime studies::Maritime management and business
• Online Access: http://hdl.handle.net/10356/74746
• Institution: Nanyang Technological University

In liner shipping, the demise of Hanjin Shipping (HJS) in 2016 has shocked the industry as a whole and created several problems across the supply chain. Despite the extreme consequences, not much research has been done in relation to the fundamental reasons of bankruptcies. Thus, the immediate objective of this paper is to investigate the underlying reasons behind bankruptcies from 1986 to 2016 so as to provide a better understanding to adapt to the competitive and volatile business landscape. To meet this desired objective, this study will employ a variety of quantitative and qualitative methods through surveys which were based on PESTLE framework, interviews with key industry players and in depth study of 3 insolvent companies – United States Lines (USL), Cho Yang Shipping (CYS) and Hanjin Shipping (HJS). Subsequently, these findings led to the development of a framework which later helps to draw and establish relationships between the relevant interdependent factors. Upon examination of these results, the study has further identified the main contributory factors leading to the insolvency of the abovementioned companies. A significant correlation was also observed between financial performance and the various factors – poor economic conditions, intense competition, trade regulations, government policies, top management and culture, limited resources as well as ineffective investments, operational and risk management strategies which will be discussed in findings and analysis. Lastly, to provide new perspectives and ideas, this study concluded with various lessons from key companies e.g. Neptune Orient Lines (NOL) and Maersk Line (MSL), along with a development of a guideline that incorporates risk, financial and strategic elements. In summary, because of the recent trend of bankruptcies and the bleak future outlook, this study hopes to minimize risk of bankruptcies by understanding the key reasons and thus, provide new and different perspectives to ensure their survival in short run and prepare themselves for the long term future.