Journal ArticleDOI
Optimal Capital Utilization by Financial Firms: Evidence from the Property-Liability Insurance Industry
J. David Cummins,Gregory P. Nini +1 more
TLDR
This paper investigated the use of capital by insurers to provide evidence on whether the capital increase represents a legitimate response to changing market conditions or a true inefficiency that leads to performance penalties for insurers.Abstract:
Capitalization levels in the property-liability insurance industry have increased dramatically in recent years—the capital-to-assets ratio rose from 25% in 1989 to 35% by 1999. This paper investigates the use of capital by insurers to provide evidence on whether the capital increase represents a legitimate response to changing market conditions or a true inefficiency that leads to performance penalties for insurers. We estimate “best practice” technical, cost, and revenue frontiers for a sample of insurers over the period 1993–1998, using data envelopment analysis, a non-parametric technique. The results indicate that most insurers significantly over-utilized equity capital during the sample period. Regression analysis provides evidence that capital over-utilization primarily represents an inefficiency for which insurers incur significant revenue penalties.read more
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Non-Life Insurance Economic Performances: An Empirical Investigation
Ornella Moro,Luisa Anderloni +1 more
TL;DR: In this paper, the impact of several firm characteristics, such as dimension, capital structure and investment policies on economic performance for a panel of non-life insurance firms operating in the main European markets spanning from 2004 to 2012.
Journal ArticleDOI
Risk-adjusted efficiency of the insurance industry: evidence from China
Wei Huang,Joseph C. Paradi +1 more
TL;DR: Wang et al. as mentioned in this paper investigated the interrelationship between risk and efficiency, based on the multistage data envelopment analysis (DEA) model, and introduced a modified measure of risk-adjusted efficiency for the insurance industry in China from 1999 to 2006.
Journal ArticleDOI
Managing Capital and Insolvency Risk via Internal Capital Market Transactions: The Case of Life Insurers
TL;DR: In this paper, the movement of capital between insurers and affiliated companies under common ownership is analyzed for understanding insurer insolvency risk and the impact of regulatory policies regarding capital standards and group supervision.
Journal ArticleDOI
Solvency surveillance and financial crisis: evidence from the Spanish insurance industry
TL;DR: In this article, the authors provided evidence on factors affecting the level of the regulatory solvency ratio of Spanish insurers from 2005 to 2012 by employing the two-step system generalised method of moments in the analysis.
References
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Journal ArticleDOI
Theory of the firm: Managerial behavior, agency costs and ownership structure
TL;DR: In this article, the authors draw on recent progress in the theory of property rights, agency, and finance to develop a theory of ownership structure for the firm, which casts new light on and has implications for a variety of issues in the professional and popular literature.
Journal ArticleDOI
Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis
TL;DR: The CCR ratio form introduced by Charnes, Cooper and Rhodes, as part of their Data Envelopment Analysis approach, comprehends both technical and scale inefficiencies via the optimal value of the ratio form, as obtained directly from the data without requiring a priori specification of weights and/or explicit delineation of assumed functional forms of relations between inputs and outputs as mentioned in this paper.
Posted Content
Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers
TL;DR: In this paper, the benefits of debt in reducing agency costs of free cash flows, how debt can substitute for dividends, why diversification programs are more likely to generate losses than takeovers or expansion in the same line of business or liquidationmotivated takeovers, and why the factors generating takeover activity in such diverse activities as broadcasting and tobacco are similar to those in oil.
Journal ArticleDOI
Corporate financing and investment decisions when firms have information that investors do not have
TL;DR: In this paper, a firm that must issue common stock to raise cash to undertake a valuable investment opportunity is considered, and an equilibrium model of the issue-invest decision is developed under these assumptions.
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