Financing Constraints and Risk Management: Evidence From Micro-Level Insurance Data

Emil Bustos, Oliver Engist (), Gustav Martinsson () and Christian Thomann ()
Additional contact information
Oliver Engist: Stockholm School of Economics
Gustav Martinsson: Royal Institute of Technology, Postal: Stockholm, Sweden
Christian Thomann: Royal Institute of Technology, Postal: Stockholm, Sweden

No 1452, Working Paper Series from Research Institute of Industrial Economics

Abstract: We study the impact of financing constraints on corporate risk management. Using data on credit scores matched with unique information on firm level commercial insurance purchases, we find that financing constraints lead to higher insurance spending. We adopt a regression discontinuity design and show that financially constrained firms spend 5–14% more on insurance than otherwise similar unconstrained firms. Our findings add new insights to the longstanding empirical puzzle of whether financially constrained firms engage more in risk management. Furthermore, our results shed light on risk management in smaller, mostly private firms.

Keywords: Financing Constraints; Risk Management; Insurance Demand; Credit Scores (search for similar items in EconPapers)
JEL-codes: D22 D25 G22 G32 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2022-12-20
New Economics Papers: this item is included in nep-cfn, nep-eur, nep-rmg and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:1452

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