Institutional performance and ship registration

•This paper introduces the net flag-out ratio, accounting for ship flagging-out and for ship flagging-in.•It examines, for the first time, the contribution of corruption and institutional measures as decisive factors in flag choice.•We find that institutional factors do not explain the traditional flag-out measure but determine the net flag-out ratio.•A country’s tax system, the ease of starting new business and the country’s corruption/transparency level determine the net flag-out ratio.•A high level of transparency and of institutional performance and friendliness to business can maintain nationally owned ships and attract foreign owned ships under the national flag.

The paper introduces a new concept in ship registration, the net flag-out ratio (in contrast to the standard flag-out ratio) and examines the potential contribution of metrics of corruption and institutional measures as decisive factors in explaining flag choice. Context-related factors are also controlled and included in the study. The study uses a cross-sectional, multiple regression econometric approach. Focusing on a sample of the 33 largest ship owning countries, we find that institutional factors do not explain the traditional flag-out measure but determine the net flag-out ratio. Our findings indicate a potential effect of institutional performance/environment on ship registration.