The Use of Capital Budgeting Techniques among UK-based Ship Operators

Abstract

The idiosyncratic characteristics of the shipping industry render the prudent appraisal of shipping investments imperative. Despite this, the shipping finance literature seems to have placed greater emphasis on the issues of credit analysis and raising funds for shipping investments as opposed to shipping investment appraisal and fund allocation. Having recognised this gap, this study aims to make a contribution in this respect through a qualitative empirical investigation. Data were collected through a mail survey of UK-based ship operators. The analysis of the results revealed the practices of the UK-based ship operators surveyed as to the popularity of the various quantitative techniques, the practices as to risk assessment and modelling and the qualitative factors influencing investment appraisal and decision making. It was also revealed, however, that capital budgeting does not seem to form part of a strategic planning and control system. Inferences as to future research and managerial implications are discussed.