Gin-Shuh Liang1 , Chin-Feng Liu1 , Wen-Cheng Lin This email address is being protected from spambots. You need JavaScript enabled to view it.1 and Chen-Huei Yeh2
1Department of Shipping and Transportation Management, National Taiwan Ocean University, Taoyuan, Taiwan 330, R.O.C 2Yang Ming Marine Transport CORP. Taiwan, R.O.C.
Received: December 6, 2005 Accepted: March 31, 2006 Publication Date: December 1, 2006
Industrial corporate bonds have been assigned quality ratings since the early 1900s. Moody and Standard & Poors (S&P), two renowned ratings organizations assign ratings to a portion of new bonds issued each year. However, many businesses and industry leaders have doubts about the consequences of bond ratings. This paper attempts to build an objective and user-friendly bond ratings approach for the shipping industry and investors. Data envelopment analysis (DEA) is employed to evaluate the corporate bond ratings of Taiwan’s shipping industry from 1997 to 2004, by applying two input variables (fixed assets and debt ratio) and two output variables (fixed assets turnover and times interest earned) as rating factors. The results show that 4 different bonds, in particular, have had relatively high ratings: ETITC’s issue of bonds from 1998 to 2003, EVERGREEN’s bond issue in 1996, and Yang Ming’s bond issue in 2003, respectively. This paper also illustrates that ETITC and Yang Ming have paid more attention on reducing default risks and creating revenue competency during the given time period.
Keywords: Bond Rating, Data Envelopment Analysis (DEA), Default Risks
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