The Determinants of the Use of Derivatives in the Japanese Insurance Companies

Lantara I Wayan Nuka () and Takao Atsushi ()
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Lantara I Wayan Nuka: Faculty of Economics and Business, Universitas Gadjah Mada, Jl. Sosio Humaniora No. 01 Bulaksumur, Yogyakarta, Indonesia 55281
Takao Atsushi: Graduate School of Business Administration, Kobe University, 2-1 Rokkodai, Nada, Kobe, Japan 657-8501

Asia-Pacific Journal of Risk and Insurance, 2013, vol. 8, issue 1, 57-81

Abstract: This paper examines the firm-specific factors determining the use of derivatives by the sample of Japanese life and non-life Japanese insurance companies during the period of 2001–2011. We find that the participation rate for the use of derivatives by insurance companies in Japan is 73.2%, much higher than those found in the US, the UK, or Australia. Using the Probit and Tobit regression models, we provide evidence that the decision to use derivatives of Japanese insurance companies is positively related to firm size, leverage, organizational form, and proportion of assets invested in stocks and bonds, but negatively associated with reinsurance dependence. We also find that the decision of Japanese insurance companies to extend their markets by operating globally increases the need for derivatives contracts.

Keywords: risk management; derivatives; insurance (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1515/apjri-2012-0008

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