Abstract

The debt financing market is an integral part of the global financial system. A company partially financed by debt faces bankruptcy danger. Although financial statement analysis covers more ratio approaches to viewing a firm’s liquidity, leverage, asset activity, profitability and performance, it cannot integrate a diverse ratio to analyze firm’s debt-paying ability. This paper employs data envelopment analysis to evaluate debt-paying ability of the shipping industry in Taiwan. After verifying all available financial information, the current study chooses a total of fourteen shipping open-market firms for analysis. The estimated results show that five shipping firms have relatively high debt-paying ability. This paper compares DEA rating results with the Taiwan Rating Company (TRC)’s ratings to increase the contribution. Empirical results show that EVERGREEN pays more attention than other shipping firms to reducing default risks and creating revenue competency.

Key words: Debt-paying ability, data envelopment analysis (DEA), default risks.