Growing the Firm - Academic Article - Ownership Structure and Financial Performance in the Trucking Industry

Ownership Structure and Financial Performance in the Trucking Industry

One of the most important industries is the trucking industry.  This is an industry that affects our lives every day.  The food we eat, the clothes we wear and the wood that our houses are constructed of were probably transported by a truck.  The article Ownership Structure and Financial Performance in the Trucking Industry was written by Arthur J. Francia, Mattie C. Porter and Christian K. Sobnwgi.  This article analyzes whether publicly held trucking companies are more or less profitable than privately owned companies and if the public held companies grow faster.  Required reports filed with the Federal Motor Carrier Safety Administration (FMCSA) were used to test their two hypotheses. 

The trucking industry is vital to our lives, so their profitability is also important.  If the trucking companies are not profitable, then they are more likely to cease business.  This will decrease the competition between the trucking companies, which could allow them to increase their prices for shipping goods.  This, in turn, will increase the prices on those goods to the consumer.  This article looks at the impact, if any, that the ownership structure has on the profitability and growth of these companies.  With the recent increases in the price of consumables, this topic is one that should catch our attention. 

The authors use hypotheses testing research for this article.  The known differences in public and private companies are used as a basis for their hypotheses.  Public companies are under a microscope when it comes to their financial performance.  The manager’s performance within the company is watched closely by the shareholders.  In contrast, a private company is often owned by the manager.  They do not have a board of directors or a group of shareholders to answer to.  The authors make the assumption that the public trucking companies will be more profitable and have more growth because of the scrutiny that they are under. 

The hypotheses are tested with a sample selection of the companies that are required to submit reports to the FMCSA.  Information from regulatory filings to the Department of Transportation and the FMCSA reports was used to analyze the differences in the profitability of the public and private companies as well as their growth.  The results of the study show that the structure of the ownership is not a determinate for the profitability of these companies.  The fierce competition in this deregulated industry has a greater effect on their profitability than their ownership structure.  Additionally, it was determined that public trucking companies grow faster than private companies and that they will continue to grow longer as well.  

Managers, owners and shareholders of trucking companies could all use this study to make decisions within their company.  If a private company is considering going public, the statistics and results of this article could be used in making their decision.  Managers of public companies could also use the extensive comparisons in this article to compare their company to the industry standards for profitability and growth.  Overall, this article had valuable information for most trucking companies.