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The U.S. Property and Liability Insurance Industry: Firm Growth, Size, and Age


  • Byeongyong Paul Choi

    1. Byeongyong Paul Choi is with Howard University, Department of Finance, International Business and Insurance, School of Business, Washington, DC 20059; phone: (202) 806-1532; fax: (202) 986-4409; e-mail: The author would like to thank two anonymous referees for their helpful comments and suggestions. This article was subject to double-blind peer review.
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The relationship between firm size, age, and growth is tested for the U.S. property and liability (P-L) insurance industry, and the determinants of firm characteristics on firm growth are analyzed. Using Heckman's two-stage methodology, this article examines the relationship between corporate growth and firm size. The relationship between firm growth and firm age is also investigated. Furthermore, to determine time-varying effects, the analysis is conducted for the different subperiods. The results of this article strongly support Gibrat's Law in the U.S. P-L insurance market for the testing periods. The results are consistent for longer time periods and for shorter subperiods. It also finds that young firms grow faster than old firms during the sample periods. Related to the determinants of firm characteristics on firm growth, insurers using less input cost tend to grow fast. Economies of scope are positively related to firm growth as well.