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Business & Finance Series: Research Spotlight

Expansion in sources for shipping finance

With 30 years of ground-breaking research, City University London academics have revolutionised the way the shipping industry funds itself, and cemented London'€™s position as a global hub.

Professor Costas Grammenos, and his research group have spent 30 years conducting research into shipping, trade and finance and have published approximately 100 articles in peer-reviewed journals. Grammenos, who has been at City since 1984, has been instrumental in encouraging shipping companies to use the equity and bond markets to fund themselves.

Investors have traditionally steered clear of investing in shipping as they found it hard to predict the performance of firms. Shipping families have often also been reluctant to go to the markets, because they were loathe to dilute their ownership in their firms. But Professor Grammenos's work has helped both owners and investors to better understand how shipping stocks behave, their potential size and performance.

Bringing understanding to the shipping industry

Professor Grammenos' early research focused on understanding shipping business cycles, bank credit risk analysis and the significance of 'family name' to the reputation of the shipping company. His focus quickly evolved to explore how equity and bond markets could be used to finance shipping companies, to supplement the more usual bank lending, and drew the attention of the shipping world to the potential of markets as sources for shipping finance.

Grammenos, who has been at City since 1984, has been instrumental in encouraging shipping companies to use the equity and bond markets to fund themselves.

In 1996 Grammenos published the first ever peer-reviewed research with PhD student Stelios Marcoulis on the performance of shipping stocks. He followed this with research into the reasons that shipping companies go public and the performance of their IPOs. Further work published in 2002 looked at ways to predict shipping stocks' performance and found that, for example, oil prices and laid up tonnage (i.e, ships not in active service) are negatively related to valuations of shipping stocks. This research gave the industry useful tools for analysing and understanding share-price performance.

In 2003 Professor Grammenos and his PhD student Angelos Arkoulis examined the potential for shipping firms to use debt finance. This had been unpopular with ship owners who were scared off by high default rates in the 1990s and because in the past poor outcomes have forced firms to go to banks to cover shortfalls. This pioneering research produced a better understanding of what determines bond shipping firms' bond prices. Later research found a way to estimate the probability that a shipping bond will default.

Getting established in the field

Grammenos and his team have established themselves as a leading global authority on shipping finance and founded the Costas Grammenos Centre for Shipping, Trade and Finance, a global research and educational hub for the shipping industry at Cass Business School, part of City University London.

[Grammenos] has featured on Lloyd's list of the One Hundred Most Influential People in the Shipping Industry, the only academic to do so.

nullThe Centre has influenced those in the shipping industry across the world by offering a forum for dialogue through its conferences, seminars and debates. The Centre has over 2,900 alumni from more than 100 countries. 

Professor Grammenos' work has had a practical impact on the industry. The heads of many firms who studied under Professor Grammenos, including Tsakos Energy Navigation, took their firms public, something which has increased performance and transparency at these firms.

Professor Grammenos is a hugely respected figure in the shipping industry and in February 2009 chaired the United Nations Conference on Trade and Development (UNCTAD) expert meeting on 'Maritime Transport and the Climate Change Challenge' in Geneva. He has featured on Lloyd's list of the One Hundred Most Influential People in the Shipping Industry, the only academic to do so.

He was made OBE (Hon) in 1994, for his work in international shipping and finance and appointed CBE (Hon) in 2008 for "services to teaching and research"..

Professor Grammenos and his team have created a new research area in the world of shipping and finance. His work and the centre he set up are widely considered a contributing reason that London has remained a hub for the global shipping industry.

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