Pre- and postderegulation financial strategies and linkages to performance in the motor carrier industry: An application of canonical scores

This study examines the financial structure of individual motor carrier industry segments to determine whether deregulation brought about significant changes in that structure. Canonical correlation is used to identify interrelationships among asset variables and liability/equity measures both prior and subsequent to the Motor Carrier Act. The paper focuses on assessing shifts in carrier risk management behaviour as illustrated by the changing interrelationships among variables in both data sets. An additional feature is the use of canonical scores to group the individual motor carriers in each industry segment into financial strategy categories and, subsequently, to compare the categories on a series of financial performance measures. This exercise forms the basis for an assessment of whether particular financial strategies were more or less successful in adapting to the environment. The results indicate a general trend for carriers either to move to risk reduction strategies or, as in the case of one carrier group (less-than-truckload general freight carriers), to continue a risk-averse strategy with regard to financial leverage, liquidity, and the maturity of assets and liabilities during the 1977 to 1986 period of transition to deregulation. There is also some indication, although weak, that particular financial strategies as defined by canonical scores are associated with better financial performance.