On the Demand for Corporate Property Insurance

Hoyt, Robert; Khang, Ho

doi:10.2139/ssrn.175989

Cited by 39 publications

(79 citation statements)

References 30 publications

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“…This enables manager-owners to retain cash resources so that they can invest in prospective positive NPV projects. In the context of property insurance, Hoyt and Khang (2000) find evidence consistent with this argument in the US corporate sector. Thus:…”

Section: Ownership Structure and Corporate Insurancementioning

confidence: 56%

“…Surprisingly, this is roughly a tenfold increase in percentage terms compared with the levels of insurance spending of Chinese PLCs reported by Zou and Adams (2006) and Zou and colleagues (2003), and approximately three times that reported in the US corporate sector by Hoyt and Khang (2000). In addition, only about 8% of firms in our sample are joint-stock companies which accounts for the lower average size of firms in our data set compared with the sample of Chinese PLCs used by Zou and Adams (2006) and Zou and colleagues (2003).…”

Section: Summary Statisticsmentioning

confidence: 62%

“…6 As noted previously in footnote 1, MacMinn and Garven (2000) and Mayers and Smith (1982), among others, argue that insurance is an integral part of corporate financial policy and thus an important strategic issue for board-level managers. Indeed, several prior academic studies (e.g., Froot et al, 1993;Hoyt & Khang, 2000;Mayers & Smith, 1982;Zou & Adams, 2006, 2008aZou et al, 2003) suggest that property insurance can be an effective strategic post-loss investment financing mechanism that can help reduce information asymmetries and financial distress/bankruptcy and other (e.g., agency) costs for firms. In this regard, managers may be motivated to purchase property insurance in order to protect and promote their job security.…”

Section: Theoretical Review and Hypotheses Developmentmentioning

confidence: 99%

“…Following prior studies (e.g., Hoyt & Khang, 2000;Mayers & Smith, 1982;Zou & Adams, 2006;Zou et al, 2003), we include firm size (measured as the natural log of book value of assets), and in our multivariate analysis, the quadratic of leverage (defined as the lagged squared value of total debt / total assets). Theory predicts that small and highly levered firms will tend to have a relatively higher demand for property insurance than other firms.…”

Section: Control Variables For Corporate Property Insurancementioning

confidence: 99%

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Insurance and ownership structure in India’s corporate sector

2010

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In this study we examine the effect of ownership structure on the decision of Indian firms to purchase property insurance. We find that firms with a high degree of managerial ownership and leverage, plus firms with high growth options, high asset tangibility, and public listing status are more likely to insure their assets than other entities. We also observe that different factors determine the amount of property insurance purchased, in particular, the higher the degree of managerial ownership and indebtedness the less indemnity coverage acquired. Additionally, the younger the firm the greater the amount of insurance purchased. We contend that our results shed light into the strategic risk management behavior of Indian firms and that such insights could be of relevance to various parties, including international and domestic business investors.Risk management (including insurance) is one of the most important strategic issues facing companies operating in rapidly growing but uncertain emerging economies such as India and other economies

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Section: Ownership Structure and Corporate Insurancementioning

confidence: 56%

Section: Summary Statisticsmentioning

confidence: 62%

Section: Theoretical Review and Hypotheses Developmentmentioning

confidence: 99%

Section: Control Variables For Corporate Property Insurancementioning

confidence: 99%

See 2 more Smart Citations

Insurance and ownership structure in India’s corporate sector

2010

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“…Following prior studies (e.g., Hoyt & Khang, 2000;Mayers & Smith, 1982;Zou & Adams, 2006), we include (lagged) log of firm size (lnSIZE), (lagged) leverage (LEV), (lagged) growth opportunities (R&D and CAP) (proxied by research and development and capital expenditure to sales ratio in 2001), and (lagged) liquidity (LIQ). Lagged values are taken as a control for possible endogeneity and persistency in the corporate insurance decision.…”

Section: Other Explanatory Variablesmentioning

confidence: 99%

Does managerial entrenchment motivate the insurance decision?

Jiang

Adams

Jia-Upreti

2012

International Review of Financial Analysis

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Directors׳ and officers׳ liability insurance and the cost of equity

Chen

Zou

2016

Journal of Accounting and Economics

110

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We examine whether directors' and officers' (D&O) liability insurance affects a firm's cost of equity. We find a positive association between D&O insurance and the cost of equity. Information quality and risk-taking appear to be two underlying channels through which D&O insurance affects the cost of equity. Further tests suggest that this positive association is not due to optimal risk-taking, as evidenced by a negative market reaction to an increase in D&O insurance coverage, a lack of improvement in firms' cash flow and a low valuation associated with D&O insurance. Overall, our evidence is consistent with the notion that D&O insurance weakens the disciplining effect of shareholder litigation, leading to an increase in the cost of equity.We thank S.P. Kothari (the editor) and an anonymous reviewer for many insightful comments and suggestions. We also thank

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On the Demand for Corporate Property Insurance

Cited by 39 publications

References 30 publications

Insurance and ownership structure in India’s corporate sector

Insurance and ownership structure in India’s corporate sector

Does managerial entrenchment motivate the insurance decision?

Directors׳ and officers׳ liability insurance and the cost of equity

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