Transportation Research Part A 47 (2013) 141–152

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Transportation Research Part A

journal homepage: www.elsevier.com/locate/tra

Internet disclosure and corporate performance: A case study

of the international shipping industry
Andreas Andrikopoulos a,⇑, Anna A. Merika b,1, Anna Triantafyllou c,2, Andreas G. Merikas d,3
a
Department of Business Administration, University of the Aegean, 8 Mihalon Street, 82100 Chios, Greece
b
Department of Economics, Deree College, 33-35 Marathonos Street, Voula 16673, Greece
c
Department of Economics, Deree College, 6 Gravias Street, Aghia Paraskevi 15342, Greece
d
Department of Maritime Studies, University of Piraeus, 33-35 Marathonos Street, Voula 16673, Greece

a r t i c l e i n f o a b s t r a c t

Article history: Dissemination of information via corporate websites is considered to be desirable, because
Received 14 December 2011 it constitutes a way round modes of market failure, such as asymmetric information in cap-
Received in revised form 20 August 2012 ital markets and agency problems. This paper explores the relationship between internet
Accepted 8 October 2012
disclosure, profitability and financial structure in the shipping sector. Its value added lies
in treating the disclosure–profitability relationship as a two-way relationship: while previ-
ous research concentrates on profitability as the main driver for greater internet disclosure,
Keywords:
we argue that the higher the degree of internet disclosure of financial information, the
Internet disclosure
Profitability
more likely it is that the firm will experience enhanced profitability. Studying the websites
Shipping industry of 171 international listed shipping corporations in 2010 we construct a disclosure index to
measure the quantity of disseminated information for each firm in the sample and we
explore the cross sectional determinants of disclosure performance. Measuring corporate
performance with profitability, we develop a simultaneous equation model and our
GMM results produce evidence of a statistically significant positive relationship between
the extent of internet disclosure and corporate performance. Our finding largely explains
why shipping firms are keen on making more and more financial information available
via the web and has significant policy implications for executives, as it suggests that
greater internet disclosure is not a mere effect of sound financial performance, but also,
and perhaps more importantly, a requirement for it.
Ó 2012 Elsevier Ltd. All rights reserved.

1. Introduction

Financial reporting has long attracted the attention of scholars in transportation research. Early studies covered a wide
range of issues pertaining to the dissemination of financial information, from the importance of differences between trans-
portation and other industries for the construction and interpretation of financial statements (Zraick, 1946) to the signifi-
cance of alternative reporting practices applied in the transport industry for potential investors (Summers, 1968).
Within transportation research, the interest in different facets and implications of financial reporting has been ongoing; it
has focused on alternative accounting policy choices (Tan et al., 2002), intangible assets reporting (Lopes, 2010),

⇑ Corresponding author. Tel.: +30 2271035158; fax: +30 2271035099.

E-mail addresses: apa@aegean.gr (A. Andrikopoulos), merikas@otenet.gr (A.A. Merika), atriant@acg.edu (A. Triantafyllou), merikas@otenet.gr (A.G.
Merikas).
1
Tel.: +30 210 8955913, +30 693 8833675.
2
Tel.: +30 210 6009800x1402, +30 697 7694530.
3
Tel.: +30 210 8955913, +30 694 5792401.

0965-8564/$ - see front matter Ó 2012 Elsevier Ltd. All rights reserved.
http://dx.doi.org/10.1016/j.tra.2012.10.016
142 A. Andrikopoulos et al. / Transportation Research Part A 47 (2013) 141–152

management accounting (Triantafylli and Ballas, 2010), as well as the importance of managerial discretion for assessing the
reliability of financial reporting (Mishra and Drtina, 2004; Sturm et al., 2011).
On the whole, it is widely accepted that disclosure of financial information is desirable in transport, as it is in all economic
sectors, because it reduces the cost of capital for firms, thus constituting a way round modes of market failure, such as asym-
metric information in capital markets and agency problems (Summers, 1968; Dye, 1985; Healy and Palepu, 2001; Gietzmann
and Ireland, 2005).
What have, perhaps, received less attention in the analysis of financial reporting and disclosure in the transport industry
are (a) the organization-specific character of financial reporting and (b) the particular role that different communication
media play in the dissemination of information. The motivation for conducting the present study stems primarily from this
gap in the literature. We focus on web reporting in the shipping industry, because websites are organization-specific and
internet disclosure constitutes an increasingly important medium of communication in the shipping industry (Lu et al., 2006).
A large body of recent research concentrates in corporate governance in shipping (Syriopoulos and Theotokas, 2007;
Lambertides and Luca, 2008; Syriopoulos and Tsatsaronis, 2011; Lu et al., 2011) confirming substantial challenges stemming
from agency problems in the shipping industry. We believe that greater internet disclosure is a step in the right direction in
the effort to ameliorate such challenges.
Disclosure of corporate fundamentals is perceived as constituting significant improvement over traditional dissemination
of financial information, supplying timely data, permitting wide reach at relatively low cost, as well as versatility and speed
in communicating information about the corporation (Ettredge et al., 2002; Marston and Polei, 2002; Xiao et al., 2004;
Pendley and Rai, 2009). These advantages can exceed disadvantages of dissemination of information via websites, such as
information overload, significant maintenance costs, as well as trust and security issues. Thus, firms in general and listed
corporations in particular tend to make increasing use of the internet for signaling purposes, using their website as a tool
for enhancing transparency and credibility.4
There is an extensive literature on the use and variation of internet disclosure, identifying the characteristics and deter-
minants of posting financial information on websites in different industries and different countries. This paper adds to the
existing literature in two ways. First, it is the first study to investigate the relationship between internet disclosure and prof-
itability for shipping firms. Second, it treats the disclosure–profitability relationship as a two-way relationship: while pre-
vious research concentrates on profitability as the main driver for greater internet disclosure, we argue that the higher
the degree of internet disclosure of financial information, the more likely it is that the firm will experience enhanced
profitability.
Studying the websites of 171 international listed shipping corporations between October–December 2010, we explore
potential determinants of internet disclosure in the case of the shipping sector. Our finding that size, leverage, and corporate
performance, constitute the main determinants of internet disclosure in the shipping sector is consistent with the literature
(Debreceny et al., 2002; Ettredge et al., 2001, 2002; Marston and Polei, 2002; Xiao et al., 2004). We construct a Disclosure
Index for each firm along the lines of Debreceny et al. (2002) and Xiao et al. (2004). Subsequently, we develop a simultaneous
equation model where corporate performance, measured by return on equity (ROE) is treated as an endogenous variable and
employ the Generalized Method of Moments (GMMs) to estimate the interaction between internet disclosure and corporate
profitability. We discover a statistically significant positive relationship between the degree of internet disclosure and cor-
porate performance. In addition, we find a strong and positive impact of concentrated ownership on disclosure, which is of
particular significance for corporate governance and capital structure in the shipping industry.
Our findings are also consistent with evidence on increasing adoption of internet technology by shipping corporations
(Lu et al., 2006, 2007). Moreover, our results largely explain why shipping firms are eager to increase the supply of informa-
tion provided via the web. They also have significant policy implications for executives, as they suggest that greater internet
disclosure is not a mere effect of sound financial performance, but also, and perhaps more importantly, a requirement for it.
The remaining of the paper is organized as follows. A review of related literature is conducted in Section 2. In the third
section we lay out our hypotheses. Our sample and methodology are presented in Section 4. Section 5 presents and discusses
our empirical findings. Concluding remarks and suggestions for further research are given in Section 6.

2. Prior research

Transportation research has shown a long standing interest in financial reporting. Very early on, research concentrated on
the peculiarities of different segments of the transport industry, such as air transport, and their significance for bookkeeping
records and regulatory compliance, especially in view of the then expected expansion in the post-World War II era (Zraick,
1946). Given the central role of financial statements in providing information to potential investors in an industry that
needed to raise new capital, research soon turned to the determinants of the effectiveness of financial accounting, stressing
that the more efficient financial statements are the less return to uncertainty will be required by investors (Summers, 1968).
The growing trend of internationalization of economic activity in the ensuing years, along with globalization of capital
markets, eventually called for greater standardization of financial reporting to enhance comparability of financial statements

4
Of course, the challenge of improving credibility and transparency is not only a challenge for corporate policy, but also for legislative reform and
governmental initiatives in transportation policy (e.g. Sciara, 2012).
 A. Andrikopoulos et al. / Transportation Research Part A 47 (2013) 141–152 143

amongst firms. As the transport industry constituted no exception to the globalization rule, further scholar interest was pro-
tracted in this direction. Accounting policy choices were investigated by Tan et al. (2002), who distinguished between deter-
minants of alternative accounting policies in air transport companies, identifying country cluster (in terms of similar
accounting systems), company size and, to a lesser extent, leverage (measured by debt level) as significant predictors of
accounting policy choice and disclosure. In spite of the fundamental differences between diverse air transport industries,
the authors also found evidence of greater harmonization and comparability of airline financial reporting thanks to interna-
tional regulation. In the same line, Lopes’ (2010) study of the Portuguese civil aviation sector concluded that recognition,
measurement and disclosure of intangible assets are transversal and structural to the air transport sector and, therefore, call
for the adoption of an international intangibles reporting standard.
A strand of transport research has concentrated on management accounting issues. Triantafylli and Ballas (2010) re-
searched the deployment of Management Control Systems (MCSs) in the Greek ocean-going merchant marine sector. They
distinguished between categories of MCS introduced and implemented by the relevant shipping companies and concluded
that the choice of MCS depends on the shipping company’s strategy and structure, while firms that choose MCS better suited
to their strategies enjoy superior performance than the other firms.
Because generally accepted accounting principles give management some discretion as to the timing and classification of
certain items in financial reporting, managerial discretion is critical for the accuracy of financial reports in reflecting com-
pany performance and prospects. For this reason, transport research has placed considerable emphasis on reporting and dis-
closure practices. For example, Mishra and Drtina (2004) found that unlike the cases of Enron and WorldCom, traditional
financial measures were capable of predicting financial distress in the case of United Airlines and Federal Mogul, an airliner
and an automotive parts manufacturer, which filed for bankruptcy in 2002 and 2001 respectively. More recently, Sturm et al.
(2011) investigated the tendency for cost underestimation in surface transport projects and attributed the apparent mis-esti-
mations to lack of guidance as opposed to bias. They make several, mainly technical, recommendations aiming to improving
cost estimation and disclosure for the benefit of transport firms, regulators, as well as the general public.

2.1. Nature and evolution of internet disclosure

Over the past one and-a-half decades or so, the launch and spread of the world-wide-web revolutionized dissemination of
information, including corporate information. Thus, financial reporting via corporate websites attracted the attention of
many researchers. A large number of studies have stressed that releasing corporate information via the internet is a superior
way of providing access to corporate fundamentals than traditional ways of communication, such as paper (e.g. Ettredge
et al., 2001; Debreceny et al., 2002; Xiao et al., 2004).
In contrast to paper disclosure, internet disclosure is considered to be cost effective, fast, flexible in format, and accessible
to all types of users within and beyond national boundaries. In this part of the literature, internet disclosure is thought to
improve timeliness of corporate releases as web sites can be updated frequently at low cost, while improving verifiability
of the data released through the use of hyperlinks. Furthermore, increasing geographic dispersion of investors has rendered
paper disclosure expensive and has limited its reach (Debreceny et al., 2002). These qualities make internet financial disclo-
sure an increasingly preferred means of corporate communication and justify its prevalence in communicating financial
reports.
However, internet financial disclosure is not homogeneous. It varies substantially with respect to the depth and volume of
released information, the frequency with which different items are presented at sites, the number of items that are presented
at any one site, as well as the manner in which the data are delivered in terms of timeliness, technology, and user support
(Marston and Leow, 1998; Lymer et al., 1999; Ettredge et al., 2002; Lybaert, 2002). There appears to be a higher degree of
homogeneity in company sites of firms that belong to the same industry, indicating that companies are inspired by and wish
to keep pace with their rivals (Lybaert, 2002; Matherly and Burton, 2005).
A number of studies predict that the increasing use of the internet by investors is likely to continue and is expected to
increase the supply of voluntary disclosures (Healy and Palepu, 2001; Jones and Xiao, 2003). However, there is little evidence
pointing to change in the nature and purpose of web disclosure of information in the past decade or so. Pendley and Rai
(2009), for example, argue that information is still, by and large, excerpted. They find that large firms continue to be the big-
gest providers of information through the internet, followed by high-tech firms and commercial firms, and the only change
in disclosure of corporate financial information is outsourcing.
The release of corporate information through corporate websites is sound, because it helps overcome manifestations of
market failure, such as asymmetric information in capital markets and agency problems. In general, informational asymme-
tries increase perceived uncertainty and thereof the cost of capital. They could be overcome if firms make credible state-
ments about their private information to distinguish themselves from other firms with worse information (Dye, 1985).
Moreover, inefficient information disclosure stems from the fact that investor’s knowledge of inside corporate information
is incomplete (leading managers to suppress bad information); it is also constitutive of a principal-agent problem between
managers and suppliers of capital. It, therefore, becomes clear that demand for financial disclosure could arise from per-
ceived information asymmetry and the need to solve agency conflicts between managers and investors. Resolution of such
agency problems is important since it can induce a reduction in the firm’s cost of capital, owing to reduced uncertainty and
risk and also improved liquidity (Healy and Palepu, 2001; Gietzmann and Ireland, 2005). Empirical evidence supports this
hypothesis for low analyst following firms, albeit not for high analyst following firms (Botosan, 1997). Ditto for firms that
144 A. Andrikopoulos et al. / Transportation Research Part A 47 (2013) 141–152

adopt aggressive accounting policies, but not for firms that adopt conservative accounting policies (Gietzman and Trombetta,
2003; Espinosa-Blasco and Trombetta, 2004).
In their study of firms in the information technology industry, in the UK, Gietzmann and Ireland (2005) tested for a neg-
ative relationship between timely disclosure and the cost of capital. They find a significant negative relationship between
timely disclosures and cost of capital that persists regardless of whether or not accounting policy choice is included as an
explanatory variable. Thus, they conclude that conservative firms appear to benefit from the lower costs of capital regardless
of accounting policy choice.
However, such results have to be interpreted with caution due to potential existence of self-selection biases. As pointed
out by Lang and Lundholm (1993), the case may simply be that firms may be willing to share more information with the
public when they are performing well. As a result, the association between capital market variables and disclosure may
be driven by firm performance rather that by disclosure per se, raising the analytical challenge of mapping the causal struc-
ture of disclosure practices.
Overall, supplying corporate information via the web appears to constitute a significant competitive advantage for the
firm. Internet presence strengthens the company’s profile, image and brand name. Disclosure of financial information
through the company’s website improves the presentation and amount of financial information available to users
(Lymer et al., 1999) and enables the company to emphasize the positive and provide their narratives for negative information
(Ettredge et al., 2000).
That all said, internet disclosure of financial information can be associated with several disadvantages that may deter
companies from providing information on line. In their review of the empirical disclosure literature, Healy and Palepu
(2001) conclude that when firms choose not to disclose financial information, they do so for two main reasons: First, disclo-
sure practices may be restrained by specific attitudes of corporate conduct such as perceived lack of demand for disclosure,
especially in the event that they have a small proportion of retail investors. Another reason is the high cost of maintaining an
investor relations page on line, such as costs of creating the site, monitoring the site, maintaining data content, revealing
information to competitors, hyper link risks and, possibly, litigation risk from stale information.
Although, in principle, internet disclosure permits distribution of information to a large audience at fairly low cost
(Matherly and Burton, 2005), the cost side of internet disclosure may not be negligible. Xiao et al. (2004), for example, high-
light the cost side of website disclosure, along with internet vulnerability to ‘‘misuse or abuse’’, ‘‘unauditability’’ of highly
hyperlinked information, and ‘‘unregulatibility’’ of cross-border web reporting. The authors warn that these features may
create problems in protecting data integrity and maintaining data and system security and underline that such complica-
tions tend to be accentuated by the fact that current regulations permit a wide variety of financial information to be pre-
sented at the companies’ discretion.

2.2. Determinants of internet disclosure

The literature on determinants of financial reporting on the web is quite varied, seeking to identify variables that poten-
tially affect internet financial disclosure in different countries or groups of countries. A wide range of variables are typically
examined, including company size, profitability, leverage, free floating equity capital, foreign listing, the need for new external
equity capital, ownership and corporate governance structure and, more recently, impact on the environment. As we proceed
to explain below, the majority of researchers depict size and profitability as the most significant variables explaining
corporate disclosure at websites. This is true for the early work published in the late 1990s (e.g. Ashbaugh et al., 1999; Craven
and Marston, 1999; Pirchegger and Wagenhofer, 1999), but also for the entire body of research published since then.
In a comprehensive work of Debreceny et al. (2002) suggest that internet disclosure is a function of both firm-specific
characteristics, as well as environmental characteristics. On the one hand, firm characteristics include size, foreign listing,
technology (high-tech companies tend to disclose more information), market to book value (as a proxy to growth prospects
and intangibles), beta, and leverage (measured as net long-term debt to equity). On the other hand, environmental charac-
teristics include internet penetration in the country and the local disclosure environment.
Ettredge et al. (2002) expand the list of determinants of internet disclosure, adding to company size the need for new
external equity capital and analysts’ perceptions of disclosure quality, which they found to be positively correlated with
internet disclosure, in contrast to annual returns and earnings which they found to be negatively correlated with internet
disclosure. Oyelere et al. (2003) who investigated firms listed on the New Zealand Stock Exchange found that the companies
that are larger and more profitable engage in online financial reporting, while internationalization does not constitute a sig-
nificant factor in explaining internet disclosure. A similar conclusion was reached by Xiao et al. (2004), who studied 300 large
Chinese companies. They found firm size, leverage, firm performance, proportion of fixed assets to be positively correlated
with internet disclosure of financial information.
In a plethora of other country-specific case studies, corporate size stands out as the most significant determinant of
internet financial disclosure. The Larrán and Giner (2002) study of Spanish listed firms, Lybaert’s (2002) study of Dutch
listed firms, and Marston’s (2003) study of leading Japanese firms all confirm this result. In a case study on the internet
disclosure practices of German firms Marston and Polei (2002) also show that firm size is the only significant variable
amongst the five firm-specific factors they examined (foreign listing, free-float, systematic risk, and profitability were
the other four). Furthermore, Matherly and Burton (2005), who studied nearly 400 firms, publicly traded in the United
States, found size to be the most important determinant of disclosure, with small firms providing the fewest disclosures
 A. Andrikopoulos et al. / Transportation Research Part A 47 (2013) 141–152 145

and largest firms providing the most. An analogous result was reached for the firms listed in the Cyprus Stock exchange
in the study of Andrikopoulos et al. (2009). They found that amongst size, leverage, and profitability, only size is a
significant determinant of internet disclosure.
Furthermore, financial disclosure on the web appears to be associated with corporate governance structure. According to
Kelton and Yang (2008), along with firm size, internet disclosure behavior is influenced by corporate governance mecha-
nisms, presumably in response to the information asymmetry between management and investors and the resulting agency
costs. Their results indicate that firms with weak shareholder rights, a lower percentage of blockholder ownership, a higher
percentage of independent directors, a more diligent audit committee, and a higher percentage of audit committee members
that are considered financial experts are more likely to engage in internet financial reporting. Recently, Dâmaso and
Lourenço (2011) argued that companies with a significant environmental impact are more likely to be disclosed in their
websites. They identify a negative relationship with leverage and ownership concentration and no significant relationship
with profitability, but confirm the importance of company size.
Company websites tend to be increasingly used to deliver information to wide audiences. As stressed by Healy and Palepu
(2001), rapid technological innovation, the emergence of network organizations, changes in the business economics of audit
firms and financial analysts, and the globalization of capital markets will continue to make disclosure a rich field of empirical
enquiry. Thus, the amount of disclosure provided by listed firms in general and shipping firms in particular is bound to in-
crease (e.g. Lu et al., 2007). Constituting a paradigmatic case of global capital flow and global trade, the shipping industry
provides a unique lab for the investigation of internet disclosure practices.

2.3. Internet disclosure and the shipping sector

In the case of the shipping sector, research on corporate communication through the internet has been largely limited to
exploring the factors that affect the use of the web in the context of liner shipping. Lu et al. (2006) developed a model of the
use of internet services for liner shipping companies based on the viewpoints of shippers, i.e. the perceived usefulness and
perceived ease of use of internet services, as well as their security concerns. Lu et al. (2006) illustrated that the simpler as-
pects of transactions between shippers and shipping lines can be managed by the shipper through the shipping line’s web-
site, thereby asserting that use of the internet can reduce transaction costs between shippers and shipping lines on the basis
of a survey conducted in Taiwan. They also pointed to the fact that use of the internet can help reduce the cost and time of
putting together and handling shipping documents, such as commercial invoices, bills of lading, and customer documents
that tend to constitute substantial expenses in liner shipping. Thus, they concluded that the internet is evolving as an
increasingly significant medium of communication for the shipping industry.
A few studies have attempted to expand the analysis to include specific industries among other potential determinants of
internet disclosure. For example, Gowthorpe and Amat (1999), Ettredge et al. (2001) and Bonsón and Escobar (2002) ex-
plored the relationship between financial reporting through the internet and various industries. They depict the banking
and energy sectors as being positively related to web financial disclosure. Similarly, Oyelere et al. (2003) identify the primary
industry sector as being positively related with financial reporting on the internet, while Bonsón and Escobar (2006) reach
the same conclusion for the financial sector.
Holm (2000) provided empirical evidence on financial reporting through the internet by 129 companies listed on the
Copenhagen Stock Exchange. In his survey, shipping companies scored well above average in maintaining a website, releas-
ing, and updating financial information through that. Moreover, Pervan (2006), who studied Croatian and Slovenian listed
joint-stock companies, found internet financial reporting significantly and positively correlated with size, profitability, num-
ber of shareholders, and foreign ownership, but negatively correlated with transport in the case of Slovenia and marine
transport in the case of Croatia.
Having been through the literature, we have seen no previous research on the internet disclosure practices in shipping;
our paper is the first essay to identify the content, the determinants, as well as the implications of internet disclosure for the
financial performance of the shipping industry.

3. Hypotheses

Firm size is a principal determinant of disclosure practices; larger firms are more visible and are subject to more public
and regulatory scrutiny (Watts and Zimmerman, 1986); therefore, are likely to voluntarily disclose more information to gain
public support for reducing political costs and raising capital (Chow and Wong-Boren, 1987; Lang and Lundholm, 1993).
Drawing on these arguments, we formulate our first hypothesis:

H1. Ceteris paribus, the size of the shipping company is positively associated with the degree of financial disclosure on
corporate websites.

Another hypothesized determinant of internet disclosure is profitability; corporate profitability has been included be-
cause managers of profitable firms have greater incentives to disclose information not only to support the continuance of
their positions and compensation arrangements (Wallace et al., 1994; Inchausti, 1997), but also to attract capital and reduce
146 A. Andrikopoulos et al. / Transportation Research Part A 47 (2013) 141–152

the risk of being undervalued by the market (Grossman and Hart, 1980). The causal effects between profitability and disclo-
sure are bidirectional: increased disclosure reduces the perceived uncertainty of investors, thus bringing about lower cost of
debt and higher profitability (e.g. Francis et al., 2005). Our second hypothesis is:

H2. Ceteris paribus, the profitability of the shipping company is positively associated with the degree of financial disclosure
on corporate websites.

We have also explored the causal effect of financial leverage on the extent of internet disclosure: increased disclosure can
reduce debt holders’ inclination to price-protect against wealth transfers from themselves to shareholders, which becomes
more likely as the proportion of debt in a company’s capital structure increases (Jensen and Meckling, 1976; Leftwich et al.,
1981). Moreover, there is evidence in the transport industry that leverage affects the risk of default (Espahbodi and Espahbodi,
1984) and financial performance in general (Corsi and Scheraga, 1989; Smith et al., 1990); therefore both lenders and share-
holders of highly levered firms would demand more information to assess the firm’ s financial health.5 The findings of Leftwich
et al. (1981) and Ferguson et al. (2002) support these arguments. The causal association between leverage and disclosure is bidi-
rectional: increased disclosure reduces the amount of uncertainty that is perceived by creditors; lower uncertainty on the revenue
prospects of the debtor and the debtor’s ability to meet fixed expenses, such as interest, and reduced uncertainty induces to in-
creased leverage (e.g. Michaelas et al., 1999; de Jong et al., 2008). Based on these arguments, we put forward our third hypothesis:

H3. Ceteris paribus, the financial leverage of the shipping company is positively associated with the extent of financial
disclosure on corporate websites.

However, it is not only the capital structure that is expected to bear influence on internet disclosure practices; it is also
the ownership structure of the employed equity capital that matters. In cases of highly dispersed ownership, minority share-
holders can exert limited control over managerial discretion; as the minority’ capital is needed, this agency conflict needs to
be resolved and voluntary disclosure can be a means of resolving this agency conflict (e.g. Cullen and Christopher, 2002). Our
fourth hypothesis is:

H4. Ceteris paribus, the extent of ownership concentration in the shipping company positively affects the extent of financial
disclosure on corporate websites.

4. Sample description and methodology

Our initial sample consisted of 171 shipping companies listed in major international stock markets such as the NYSE, the
NASDAQ, the London Stock Exchange, the Singapore Stock Exchange and the Oslo Stock Exchange. Our sample included
roughly 80% of all shipping companies listed in these stock markets. The remaining of the companies listed had websites
with no more than the basic information which did not allow us to include them in the construction of our index. We in-
cluded firms in our sample if they own and/or operate merchant ships (excluding tourism, oil drilling, conglomerate com-
panies with shipping not being the major focus, etc.). Merchant ships of listed companies refer to tankers, dry bulk and
containers. The global nature of the shipping industry permits pooling of firms from different markets; the international
dimension of shipping has been recognized by the European Commission in the Green paper towards a future maritime pol-
icy (European Commission, 2010).6
All 171 firms in our sample had a website, all of which were accessible. We visited the websites of the 171 sample com-
panies between October and December 2010 to investigate the presence of each of the 31 disclosure items that comprise our
index. The index has been developed on the basis of the framework of web-based disclosure proposed by Debreceny et al.
(2002) and Xiao et al. (2004). In computing the index, a binary score assumes the value 1 if the respective information item is
disclosed and 0 otherwise. The index includes 9 format items (e.g. video files, internal search engine) and 22 content items
(e.g. press releases, annual reports). Format items reflect the way the data are presented in the corporate website and the
degree of convenience of the website for the user. Table 1 lists all items incorporated in our index.
The dependent variables in our model have been selected amongst items that comprise our disclosure index. Our primary
measure is TSC, which is the company’s total disclosure score, is the sum of the binary scores across all 31 items. The other

5
Highly leveraged shipping companies, especially within dry bulk industry, have come under increasing pressure from shareholders and lenders alike, to
engage in more detailed and frequent financial disclosure. This has been especially prevalent since the freight market collapse in the past two years and may be
indirectly, yet clearly witnessed by looking at the increased number of vessel value impairments carried out by many companies in the sector. The need for
more detailed financial disclosure has to do with the inherent volatility of the shipping markets, which is contributing to increased uncertainty about shipping
firms’ revenues and future prospects. For example, in July 2012, the average daily charter rates earned by capesize vessels rose by 122% in a period of only 11
trading days, before retreating by 41% in the subsequent 15 days. As a result of such large shifts in market trends, there can be a growing mismatch between the
vessels’ book values and market values; therefore, lenders and shareholders are subject to increased uncertainty about the prospects of their investments. In
this respect, lenders are particularly interested in assessing a company’s credit risk in order to see whether the interest and principle on their loans will be paid
as scheduled. Shareholders are more interested in examining whether their investment is likely to earn a return higher than their cost of capital. In both cases,
capital providers are interested in judging the ability of a company to remain a going concern.
6
In the Green Paper, it is stated that ‘European companies and residents today own about 40% of the world’s shipping fleet’.
 A. Andrikopoulos et al. / Transportation Research Part A 47 (2013) 141–152 147

Table 1
Disclosure index.

Disclosure items Number of shipping firms Percentage of

reporting the item 171 firms
Content
1 Half-year report of current year 17 9.94
2 Annual report of current year (full text) 136 79.5
3 Annual report of past years (full text) 143 83.6
4 Auditor report of current year 128 74.9
5 Balance sheet of current year 131 76.6
6 Income statement of current year 133 77.8
7 Cash flow statement of current year 131 76.6
8 Notes to financial statements of current year 133 77.8
9 Management Report/Analysis in current year 132 77.2
10 Top 10 stockholders in current year 64 37.4
11 Summary of key ratios over a period of at least 3 years 52 30.4
12 Summary of financial data over a period of at least 3 years 98 57.3
13 Changes in stockholders’ equity in the current year 4 2.3
14 Historical share prices 115 67.2
15 Share price performance in relation to stock market index 108 63.2
16 Earnings forecast 12 7
17 Current press releases or news 147 86
18 Current share price 119 69.5
19 Financial calendar 89 52
20 Information on the latest update 52 30.4
21 E-mail to investor relations 98 57.3
22 Frequently asked questions 33 19.3
Format
23 Hyperlinks inside the annual report 11 6.4
24 Financial data in processable format (such as Excel) 14 8.2
25 Annual report in PDF-format 143 83.6
26 Video files 23 13.5
27 Table of content/sitemap 86 50.3
28 Internal search engine 76 44.4
29 Direct e-mail hyperlink to investor relations 85 49.7
30 Online investor information order service 1 0.6
31 Mailing list 60 35.1

two measures of disclosure are constructed from different subsets of the 31 items, focusing on specific attributes of disclo-
sure (content and format).
In order to carry out our analysis, we collected financial data for the 2010 fiscal year (December 31, 2010), retrieved from
company records and websites. Table 2 provides the definition of all variables used in the analysis; all accounting figures
were measured in millions of dollars. Following the approach of Ettredge et al. (2002) and Debreceny et al. (2002), we prox-
ied size with the logarithm of each firm’s total assets in 2010; consistent with previous work in the literature (e.g. Leuz and
Verrecchia, 2000), we have measured profitability in terms of the return on equity (ROE). The amount of debt was measured
with total liabilities over equity (DEBT). Finally, we have measured concentrated ownership with the proportion of equity
that is owned by the largest shareholder. Tables 3a and 3b present the descriptive statistics for these variables.
The negative minimum value in our sample, under Tables 3a and 3b, for DEBT (Debt/equity) belongs to a firm that in this
particular year, given the substantial downturn of the market, the value of its mortgaged assets declined so it ended up with
negative equity.

Table 2
Definition of dependent and independent variables.

Dependent variables
TOTAL SCORE (TSC) Total score for all 31 disclosure items
CONTENT (CONT) Total score for content items
FORMAT Total score for presentation items
Explanatory variables
SIZE (LTAS) Natural logarithm of total assets (TASs)
ROE Return on equity
DEBT Total liabilities over equity
OWN Percentage the largest shareholder
LFAS Natural logarithm of fixed assets (FASs)
PRM Profit margin
148 A. Andrikopoulos et al. / Transportation Research Part A 47 (2013) 141–152

Table 3a
Descriptive statistics for our variables: disclosure.

TSC CONT FORMAT

Mean 15.1161 12.2232 2.8928
Median 17.0000 14.0000 3.0000
Maximum 24.0000 19.0000 6.0000
Minimum 0.00000 0.0000 0.0000
Std. dev. 6.5632 5.4898 1.4848

Table 3b
Descriptive statistics for our variables: financial structure.

ROE FAS DEBT TAS OWN PRM

Mean 0.3326 2348.086 0.6537 2895.667 0.3260 0.7473
Median 0.0506 830.595 0.6841 1037.215 0.2987 0.0491
Maximum 12.2844 55184.41 8.1881 66413.80 0.9018 75.5838
Minimum 34.4697 4.42 146.3317 26.88000 0.0083 3.1741
Std. dev. 3.6383 6066.99 16.0882 7208.063 0.2268 7.1720

Table 4
Our set of instruments.

R2 F
TSC 0.79 22.90
DEBT 0.70 13.34
PRM 0.78 20.50
CONT 0.71 14.25
FORMAT 0.36 4.74

In order to map the causal interdependence between disclosure performance and the characteristics of the firm, we setup
a model of simultaneous equations:
ROE ¼ f ðOWN; LDEBT; LTAS;DÞ
D ¼ zðROE; LTAS; LDEBT; OWNÞ
LDEBT ¼ wðROE;D; LTAS; OWNÞ
where ROE, D the disclosure index (TSC or CONT or FORMAT) and DEBT are of course, endogenous variables. LTAS is total
assets expressed in logarithms, and OWN is the percentage ownership which are sluggish and therefore can be considered
as predetermined.
GMM was chosen over IV because in the presence of heteroskedasticity is more efficient than the simple IV estimator but
even in the absence of it is no worse asymptotically than the IV estimator. Assume our set of instruments is
X ¼ ½FORMAT; LTAS; LFAS; PRM
where LFAS and PRM are external instruments and LTAS and FORMAT do not appear explicitly on the left hand side of our
equations.7 In the model where FORMAT is the dependent variable we use CONTENT as an instrument instead. To provide more
orthogonality conditions we use not only X but also XX, that is squares and cross-products of the variables in X. In our case this
would mean 15 instruments in total.
Given the linear system:
ROEi ¼ f ðOWNi ; DEBTi ; LTASi ; Di Þ þ ui1
Di ¼ zðRi ; LTASi ; DEBTi ; OWNi ÞÞ þ ui3 ;
DEBTi ¼ wðRi ; Di ; LTASi ; OWNi ÞÞ þ ui4 ;
The error terms can be correlated and exhibit arbitrary patterns of heteroskedasticity, since we use cross-sectional data. The
orthogonality conditions have as follows:

7
We chose LFAS as one of the external instruments based on evidence that fixed assets are an important determinant of financial performance in the
transport industry (e.g. Capobianco and Fernandes, 2004).
 A. Andrikopoulos et al. / Transportation Research Part A 47 (2013) 141–152 149

X
n
n1 ðROEi  f ðOWNi ; DEBTi ; LTASi ; Di ; hÞÞX ik ¼ 0
i¼1
X
n
1
n ðDi  zðRi ; LTASi ; DEBTi ; OWNi ; hÞÞX ik ¼ 0
i¼1
X
n
n1 ðDEBTi  wðROEi ; Di ; LTASi ; OWNi ; hÞÞX ik ¼ 0
i1

h is the vector of parameters in the linear models f, z and w. This provides a total of 2 K (30 in our case) equations for the 15
parameters (including constant terms) and provides the fundamental basis for GMM. Variable D is defined as TSC, CONT and
FORMAT. Thus, we run GMM estimations for three models.
An important issue in GMM estimation is the issue of weak instruments. If instruments are weak, two-stage least squares
and GMM can lead to biases even in large samples, and the distributions can be far from normality. This issue is dealt with in
Stock and Yogo (2005). As noted in Stock and Watson (2003, p. 350) a simple guide is the calculated F-statistic in the first
stage (reduced form) regression (see Table 4). If F is greater than 10, we need not worry, but this number of course depends
on the number of instruments used. On the weak instrument problem, Wooldridge (2002) demonstrates that in certain in-
stances the problem of weak instruments can result in the (biased) OLS estimator being preferred.
In our application the critical value of the F-statistic is 10.93; TSC and ROE pass the test comfortably while DEBT and
CONT less so. In the model where the Di is substituted by FORMAT the test is not passed, so for this equation in our third
model the weak instruments problem has not been effectively dealt with.

5. Empirical findings and discussion

Tables 5–7 contain the GMM estimation of our model, for all disclosure measures.
Our findings support our hypotheses and are consistent with the literature. In the models presented in Tables 5–7, where
disclosure is measured with the total disclosure score (TSC), the disclosure’s content (CONT) and format (FORMAT) respec-
tively, all variables have the expected signs. Moreover, the impact of ROE (profitability), OWN (ownership dispersion) and
DEBT (liabilities over equity) on TSC, CONT and FORMAT respectively is highly significant. It, therefore, appears that internet
disclosure in all the three forms defined in this study goes hand in hand with enhanced financial performance, ownership
concentration, as well as higher leverage. As such, disclosure of financial information via the web evolves as an important
item in the investors’ decision making process.
Focusing on the TSC model, which passes comfortably the weak instruments test, it is evident that higher profitability
contributes significantly towards greater disclosure to attract prospective investors, but also to maintain the trust of current
investors. It also appears that the larger the company size and the higher the leverage over equity, the greater the disclosure
of financial reporting, hence the accountability of the company.
The third equation of Table 5 reveals a significant and negative impact of profitability on the leverage of the shipping
company. This result renders support to the pecking order theory, a finding reported for the first time in relation to the ship-
ping sector. Furthermore, our results in each one of the three models tested indicate that ownership concentration affects
positively and strongly firm profitability in the shipping industry, a finding which allies with the results reported by Tsionas
et al. (2011). Finally, it is noted that the value of the J-statistic confirms the validity of our model in all three cases examined.

Table 5
GMM estimation when Di = TSC.

Dep. variable ROE Dep. variable TSC Dep. variable DEBT

Coefficient Coefficient Coefficient
Const 2.7609 Const 5.4463 Const 4.1427
(0.1943)*** (0.8846)*** (0.8675)***
TSC 0.1314 ROE 0.6463 ROE 0.3112
(0.0054)*** (0.0676)*** (0.0280)***
LTAS 0.0432 DEBT 0.7791 TSC 0.2521
(0.0226)** (0.0840)*** (0.0146)***
OWN 0.3218 LTAS 1.0299 LTAS 0.7426
(0.1160)*** (0.1249)*** (0.1004)***
DEBT 0.1739 OWN 3.0001 OWN 2.8807
(0.0224)*** (0.7938)*** (0.5817)***
J-statistic 0.184885

Significant at the 10% level.
**
Significant at the 5% level.
***
Significant at the 1% level.
150 A. Andrikopoulos et al. / Transportation Research Part A 47 (2013) 141–152

Table 6
GMM estimation when Di = CONT.

Dep. variable ROE Dep. variable CONT Dep. variable DEBT

Coefficient Coefficient Coefficient
Const 3.2225 Const 7.2137 Const 3.3929
(0.2357)*** (0.5402)*** (0.9660)***
CONT 0.1772 ROE 0.5273 ROE 0.3147
(0.0068)*** (0.0531)*** (0.0280)***
LTAS 0.0767 DEBT 0.5163 CONT 0.2888
(0.0240)*** (0.0622)*** (0.0211)***
OWN 0.3937 LTAS 0.5428 LTAS 0.6438
(0.1223)*** (0.0711)*** (0.0995)***
DEBT 0.1689 OWN 1.5724 OWN 2.4426
(0.0235)*** (0.5898)*** (0.5743)***
J-statistic 0.177866

Significant at the 10% level.
⁄⁄
Significant at the 5% level.
***
Significant at the 1% level.

Table 7
GMM estimation when Di = FORMAT.

Dep. variable ROE Dep. variable FORMAT Dep. variable DEBT

Coefficient Coefficient Coefficient
Const 1.4261 Const 1.7102 Const 6.7953
(0.1781)*** (0.3251)*** (0.8794)***
FORMAT 0.4116 ROE 0.1125 ROE 0.2651
(0.0228)*** (0.0167)*** (0.0280)***
LTAS 0.0125 DEBT 0.2604 FORMAT 1.2545
(0.0253) (0.0233)*** (0.0384)***
OWN 0.1398 LTAS 0.4878 LTAS 1.0201
(0.0796)** (0.0482)*** (0.1132)***
DEBT 0.1896 OWN 1.3350 OWN 3.4333
(0.0225)*** (0.1859)*** (0.5585)***
J-statistic 0.193068

Significant at the 10% level.
**
Significant at the 5% level.
***
Significant at the 1% level.

6. Concluding remarks

This paper contributes to the existing literature on financial reporting in the shipping industry. It explores web-based cor-
porate disclosure by conducting an investigation of the relationship between internet financial disclosure and profitability
for the shipping sector. It extends previous research, which largely treats profitability as the main driver for greater internet
disclosure, by arguing that the higher the degree of internet disclosure of financial information, the more likely it is that the
firm will experience enhanced profitability.
On the basis of information derived from the study of the websites of 171 international listed shipping corporations dur-
ing the last quarter of 2010, we constructed a disclosure index and employed a GMM model to explore potential determi-
nants of internet disclosure in shipping. We strengthen the literature that depicts size, leverage, ownership concentration,
and corporate performance as the main determining factors behind disclosure of financial information via the web by assert-
ing this finding in the case of the shipping industry.
Our results provide justification for the apparent keenness of shipping firms in making more and more financial informa-
tion available via the web in recent years and demonstrate that web disclosure could be seen as a prerequisite for sound
financial performance. Thus, the main policy implication of our study for shipping management is that performance could
be substantially propped up by enhanced disclosure of financial information through the internet.
Future research on disclosure practices in the shipping industry should extend the scope of studying disclosures to in-
clude disclosure of non-financials, such as corporate social responsibility reports. The latter are known to affect the cost
of capital and market valuation, while being affected by the same cross-sectional characteristics as financial disclosure prac-
tices. The cross-section of corporate social responsibility reporting practices will point to the idiosyncratic characteristics,
which shape the shipping companies’ effort to achieve sustainable legitimacy in the society, low cost of finance in the capital
markets, as well as viability in the competitive terrain of transportation services. Corporate disclosure should be viewed as
forming part of an institutional framework, which aims to promote and safeguard stakeholders’ interests.
 A. Andrikopoulos et al. / Transportation Research Part A 47 (2013) 141–152 151

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