 Fair value information and regulatory capital management using financial asset reclassification by Korean insurersEugenia Y. Lee, Young Jun Kim and Sangyoon Lee Finance Research Letters, 2023, vol. 56, issue C Abstract: This study examines whether and when insurers adjust their classification of financial assets to manage regulatory capital. Using a sample of Korean insurers during 2013 to 2019, we document the following. First, insurers exhibit a tendency to adjust the classification of debt securities between held-to-maturity (HTM) and available-for-sale (AFS) financial assets when the companies have lower regulatory capital ratios. Second, the reclassification of debt securities from HTM to AFS is more pronounced when the excess of fair value over the carrying amount of the securities becomes larger. Third, the tendency to reclassify debt securities from AFS to HTM becomes greater when the accumulated valuation gains on AFS are larger. Overall, our study provides evidence that insurers use accounting discretion to manage regulatory capital and that fair value information can predict such behavior. Keywords: Reclassification; Fair value; Financial assets; Insurance; Regulatory capital management (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:56:y:2023:i:c:s1544612323004774 DOI: 10.1016/j.frl.2023.104105 Access Statistics for this article Finance Research Letters is currently edited by R. Gençay More articles in Finance Research Letters from Elsevier |
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