Wen-Yen Hsu is an Associate Professor in the Department of Risk Management and Insurance, Feng Chia University, Taiwan. Hsu can be contacted via e-mail: firstname.lastname@example.org. Yenyu (Rebecca) Huang is an Associate Professor in the Department of Tourism and Leisure Management, St. John's University Taiwan. Huang can be contacted via e-mail: email@example.com. Gene Lai (corresponding author) is a Safeco Distinguished Professor of Insurance in the Department of Finance and Management Science, Washington State University. Lai can be contacted via e-mail: firstname.lastname@example.org. Both Gene Lai and Wen-Yen Hsu are research fellows in Risk and Insurance Research Center, College of Commerce, National Chengchi University, Taiwan. The authors would like to thank the two anonymous referees for their helpful suggestions and comments on earlier drafts of the manuscript.
Corporate Governance and Cash Holdings: Evidence From the U.S. Property–Liability Insurance Industry
Version of Record online: 1 JUL 2014
© 2014 The Journal of Risk and Insurance
Journal of Risk and Insurance
Volume 82, Issue 3, pages 715–748, September 2015
How to Cite
Hsu, W.-Y., Huang, Y. and Lai, G. (2015), Corporate Governance and Cash Holdings: Evidence From the U.S. Property–Liability Insurance Industry. Journal of Risk and Insurance, 82: 715–748. doi: 10.1111/jori.12049
- Issue online: 26 AUG 2015
- Version of Record online: 1 JUL 2014
This article examines the impact of board and finance committee characteristics on insurers' cash holdings using a sample of 1,454 U.S. stock property–liability insurer-year observations. We focus on the roles of independent board members and independent finance committee members. Our results suggest that independent board members allow managers to hold excess cash holdings to avoid underinvestment and play a monitoring role in managers' cash spending behavior in a regulated industry. The overall findings are consistent with the independent director responsibility hypothesis, which suggests that independent directors play a monitoring role in managers' cash spending behavior and avoiding underinvestment problems.