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Intangible Assets and Firm Asset Risk Taking: An Analysis of Property and Liability Insurance Firms

Authors

  • Tong Yu,

    1. Tong Yu is in the College of Business Administration, University of Rhode Island; e-mail: tongyu@uri.edu. Bingxuan Lin is in the College of Business Administration, University of Rhode Island, Xinhua School of Finance and Insurance, Zhongnan University of Economics and Law; e-mail: blin@uri.edu. Henry R. Oppenheimer is in the College of Business Administration, University of Rhode Island; e-mail: henryo@uri.edu. Xuanjuan Chen is in the College of Business Administration, Kansas State University; e-mail: jchen@ksu.edu. We appreciate comments from Helen Doerpinghaus, Scott Harrington, Steven Pottier, Mary Weiss (the editor), Tian Xiao (NAIC), two anonymous referees, and the participants at the American Risk and Insurance Association 2003 meeting, Western Risk and Insurance Association 2003 meeting, International Insurance Society 2003 meeting (Research Excellence Award), and Financial Management Association 2003 meeting. The authors also gratefully acknowledge financial support from the College of Business Administration at the University of Rhode Island. All errors are our own. This article was subject to double-blind peer review.
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  • Bingxuan Lin,

    1. Tong Yu is in the College of Business Administration, University of Rhode Island; e-mail: tongyu@uri.edu. Bingxuan Lin is in the College of Business Administration, University of Rhode Island, Xinhua School of Finance and Insurance, Zhongnan University of Economics and Law; e-mail: blin@uri.edu. Henry R. Oppenheimer is in the College of Business Administration, University of Rhode Island; e-mail: henryo@uri.edu. Xuanjuan Chen is in the College of Business Administration, Kansas State University; e-mail: jchen@ksu.edu. We appreciate comments from Helen Doerpinghaus, Scott Harrington, Steven Pottier, Mary Weiss (the editor), Tian Xiao (NAIC), two anonymous referees, and the participants at the American Risk and Insurance Association 2003 meeting, Western Risk and Insurance Association 2003 meeting, International Insurance Society 2003 meeting (Research Excellence Award), and Financial Management Association 2003 meeting. The authors also gratefully acknowledge financial support from the College of Business Administration at the University of Rhode Island. All errors are our own. This article was subject to double-blind peer review.
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  • Henry R. Oppenheimer,

    1. Tong Yu is in the College of Business Administration, University of Rhode Island; e-mail: tongyu@uri.edu. Bingxuan Lin is in the College of Business Administration, University of Rhode Island, Xinhua School of Finance and Insurance, Zhongnan University of Economics and Law; e-mail: blin@uri.edu. Henry R. Oppenheimer is in the College of Business Administration, University of Rhode Island; e-mail: henryo@uri.edu. Xuanjuan Chen is in the College of Business Administration, Kansas State University; e-mail: jchen@ksu.edu. We appreciate comments from Helen Doerpinghaus, Scott Harrington, Steven Pottier, Mary Weiss (the editor), Tian Xiao (NAIC), two anonymous referees, and the participants at the American Risk and Insurance Association 2003 meeting, Western Risk and Insurance Association 2003 meeting, International Insurance Society 2003 meeting (Research Excellence Award), and Financial Management Association 2003 meeting. The authors also gratefully acknowledge financial support from the College of Business Administration at the University of Rhode Island. All errors are our own. This article was subject to double-blind peer review.
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  • Xuanjuan Chen

    1. Tong Yu is in the College of Business Administration, University of Rhode Island; e-mail: tongyu@uri.edu. Bingxuan Lin is in the College of Business Administration, University of Rhode Island, Xinhua School of Finance and Insurance, Zhongnan University of Economics and Law; e-mail: blin@uri.edu. Henry R. Oppenheimer is in the College of Business Administration, University of Rhode Island; e-mail: henryo@uri.edu. Xuanjuan Chen is in the College of Business Administration, Kansas State University; e-mail: jchen@ksu.edu. We appreciate comments from Helen Doerpinghaus, Scott Harrington, Steven Pottier, Mary Weiss (the editor), Tian Xiao (NAIC), two anonymous referees, and the participants at the American Risk and Insurance Association 2003 meeting, Western Risk and Insurance Association 2003 meeting, International Insurance Society 2003 meeting (Research Excellence Award), and Financial Management Association 2003 meeting. The authors also gratefully acknowledge financial support from the College of Business Administration at the University of Rhode Island. All errors are our own. This article was subject to double-blind peer review.
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Abstract

Intangible assets facilitate insurers' capacity to retain existing business and attract new clients. In this study we analyze how the incentives to protect intangible assets affect asset risk-taking behavior of property and liability insurers. The result supports the view that insurers' incentives to protect their intangible assets lead to an inverse relation between intangible assets and asset risk. Consistent with the view that highly levered firms may go for broke, asset risk of highly levered insurers is less elastic to intangible assets than that of lower-levered insurers. An additional notable finding of our article is that tangible factors like firm size and capitalization increase insurers' appetites for asset risk taking.

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