Abstract
The virtual disappearance of liner shipping conferences from US markets and their elimination in European trades create a significant risk that in place of these collusive price-setting groups, the industry could become increasingly consolidated. The absence of the conference pricing cushion could end up giving an advantage to large, cost-efficient carriers who will drive smaller players from the market. During this competitive process, shippers could see lower freight rates and better service but as the industry consolidates towards oligopoly, there is the risk that shippers will be faced with fewer alternatives to move their goods, lower service quality and significantly higher prices. The impact on merchandise trade could be substantial. This paper is intended to reveal basic structural characteristics of the liner shipping industry that could point to more accurate predictions of future consolidation activity. In particular, a series of mergers and acquisitions in the industry will be examined against the backdrop of industry structure and regulatory constraints. Ultimately, a Poisson model is formulated and estimated to extract and quantify the structural factors that increase the likelihood of horizontal merger and acquisition activity.
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Notes
While mergers waves are empirically supported there is no evidence that they occur with any specific periodicity. See Golbe and White (1993) and Barkoulas et al (2001).
Gort (1969) provides the comprehensive neoclassical view on merger activity. More up-to-date research on the topic is found in Andrade and Stafford (2004), Andrade et al (2001), Mitchell and Mulherin (1996) and Jensen (1993).
Goriatchev (2006, p. 6).
This was particularly true in the airline industry. See Gregor et al (2001).
Schoenberg and Richard (1999) find that while ‘… exposure to deregulation is in fact the most important single discriminator between industries with high and low acquisition activity, industry concentration and industry growth rate are also supported as determinants of the takeover rate within an industry’.
There were no instances of negative demand growth greater than 1 standard deviation for the length of the sample period.
The LR test measures how well the model predicts the dependent variable relative to just a constant term.
See for example, Maloney and Robert (1988) and literature cited in Note 2.
India is the latest country to have abolished liner shipping conferences from its markets.
See Lam Jasmine et al (2007) for a comprehensive view of structure conduct and performance in liner shipping.
There is no conclusive evidence that concentration in liner shipping positively and significantly influences price. See Haralambides (2004) for a discussion.
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Fusillo, M. Structural Factors Underlying Mergers and Acquisitions in Liner Shipping. Marit Econ Logist 11, 209–226 (2009). https://doi.org/10.1057/mel.2009.3
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DOI: https://doi.org/10.1057/mel.2009.3