Capital structure determinants of shipbuilding companies

The objective of this paper is to ascertain the major determinants of capital structure decisions for globally listed shipbuilding companies, and how quickly these companies adjust their capital structures when deviating from their target leverage ratios. Using a range of multiple regression models we find size, asset risk and the market-to-book ratio to be the most influential observable determinants of capital structure, though unobserved company-specific effects remain highly influential. Shipbuilders can be said to have relatively lower adjustment than deviation costs compared to other industries, as they tend to adjust their capital structures significantly faster.