 The Impact of Institutional Ownership on the Reinsurance DecisionRebecca Toppe Shortridge and Stephen M. Avila Risk Management and Insurance Review, 2004, vol. 7, issue 2, 93-106 Abstract: Risk management has a central role in corporate America. Insurance companies frequently manage risk by purchasing reinsurance because it reduces the downside risk (i.e., bankruptcy risk) of an insurer. Because reinsurance is costly, Mayers and Smith (1990, Journal of Business, 63: 19‐40) argue that reinsurance purchases should be negatively associated with the diversification of the owners' portfolios. Further, institutional owners play a significant role in equity markets yet we know little about their effect on firm behavior. The purpose of this study is to examine empirically the influence of institutional ownership on reinsurance for a sample of widely held property‐liability insurers. We hypothesize that insurers with higher levels of institutional ownership purchase less reinsurance. Using a sample of 45 publicly traded property‐liability insurers from 1995 to 1997, we demonstrate that the utilization of reinsurance decreases as the level of institutional ownership increases. This suggests that the diversification of the owners' portfolios is a determinant of the insurers' reinsurance decisions. Date: 2004 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:rmgtin:v:7:y:2004:i:2:p:93-106 Access Statistics for this article Risk Management and Insurance Review is currently edited by Mary A. Weiss More articles in Risk Management and Insurance Review from American Risk and Insurance Association |
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