Effects of Business Diversification on Asset Risk-Taking : Evidence from the U.S. Property-Liability Insurance Industry
We investigate the effect of line-of-business diversification on asset risk-taking in the U.S. property-liability industry. The coordinated risk management hypothesis (Schrand and Unal, 1998) implies a negative relation between underwriting risk and investment risk. Consistent with this hypothesis we find that diversified insurers take more asset risk than non-diversified insurers, and that the degree of asset risk-taking is positively related to diversification extent. Our results are robust to corrections for potential endogeneity bias, selectivity bias, and alternative diversification and asset risk measures. We also provide event study evidence that further supports the coordinated risk management hypothesis. Specifically, we find that when a focused firm diversifies, it increases its asset risk relative to firms that remain focused, and when a diversified firm refocuses, it reduces its asset risk relative to firms that remain diversified
Year of publication: |
2020
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Authors: | Che, Xin |
Other Persons: | Liebenberg, Andre P. (contributor) |
Publisher: |
[2020]: [S.l.] : SSRN |
Subject: | USA | United States | Diversifikation | Diversification | Schadenversicherung | Property-casualty insurance | Haftpflichtversicherung | Liability insurance | Portfolio-Management | Portfolio selection | Unternehmenserfolg | Firm performance |
Description of contents: | Abstract [papers.ssrn.com] |
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Extent: | 1 Online-Ressource |
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Type of publication: | Book / Working Paper |
Language: | English |
Notes: | In: Journal of Banking and Finance, Vol. 77, 2017 Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments December 1, 2014 erstellt Volltext nicht verfügbar |
Classification: | G22 - Insurance; Insurance Companies ; G32 - Financing Policy; Capital and Ownership Structure ; G39 - Corporate Finance and Governance. Other ; M49 - Accounting and Auditing. Other |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10012830555
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