Risk Taking and Performance of Public Insurers: An International Comparison

Authors

  • L. Paige Fields,

    1. L. Paige Fields is an Associate Professor in the Department of Finance, Mays Business School, Texas A&M University. Manu Gupta and Puneet Prakash are Assistant Professors in the Department of Finance, Insurance and Real Estate, Virginia Commonwealth University. The authors can be contacted via e-mail: PFields@Mays.tamu.edu, mgupta2@vcu.edu, and pprakash@vcu.edu, respectively. We are very grateful to Ty Leverty and Richard Phillips for comments on the article. We would like to thank Dr. Robert Klein especially for help with the regulatory variable for the United States employed in this study.
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  • Manu Gupta,

    1. L. Paige Fields is an Associate Professor in the Department of Finance, Mays Business School, Texas A&M University. Manu Gupta and Puneet Prakash are Assistant Professors in the Department of Finance, Insurance and Real Estate, Virginia Commonwealth University. The authors can be contacted via e-mail: PFields@Mays.tamu.edu, mgupta2@vcu.edu, and pprakash@vcu.edu, respectively. We are very grateful to Ty Leverty and Richard Phillips for comments on the article. We would like to thank Dr. Robert Klein especially for help with the regulatory variable for the United States employed in this study.
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  • Puneet Prakash

    1. L. Paige Fields is an Associate Professor in the Department of Finance, Mays Business School, Texas A&M University. Manu Gupta and Puneet Prakash are Assistant Professors in the Department of Finance, Insurance and Real Estate, Virginia Commonwealth University. The authors can be contacted via e-mail: PFields@Mays.tamu.edu, mgupta2@vcu.edu, and pprakash@vcu.edu, respectively. We are very grateful to Ty Leverty and Richard Phillips for comments on the article. We would like to thank Dr. Robert Klein especially for help with the regulatory variable for the United States employed in this study.
    Search for more papers by this author

Abstract

We investigate how investor protection, government quality, and contract enforcement affect risk taking and performance of insurance companies from around the world. We find that better investor protection results in less risk taking, as do higher quality government and greater contract enforceability. However, we find only limited evidence that these factors influence firm performance. We conclude that better overall operating environments result in less risk taking by insurers without the concomitant decline in performance. These results imply that better investor protection environments benefit policyholders and outside stockholders by preventing corporate insiders from expropriating wealth from policyholders and outside stockholders.

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