Institutional ownership stability and risk taking : evidence from the life–health insurance industry
Document Type
Journal article
Source Publication
Journal of Risk and Insurance
Publication Date
9-2011
Volume
78
Issue
3
First Page
609
Last Page
641
Publisher
American Risk and Insurance Association
Abstract
We investigate the relationship between risk taking of life–health (LH) insurers and stability of their institutional ownership within a simultaneous equation system model. Three main results are obtained. First, stable institutional ownership of is associated with lower total risk of LH insurers, supporting the prudent-man law hypothesis. Second, when investors are sorted in terms of stringency of the prudent-man restrictions, their negative effect on risk holds for all, except insurance companies, as owners of LH insurers. Third, large institutional owners do not raise the riskiness of the investee-firms, as proposed by the large shareholder hypothesis. Regulatory implications are drawn.
DOI
10.1111/j.1539-6975.2011.01427.x
Print ISSN
15396975
E-ISSN
00224367
Funding Information
Financial support from the Networks Financial Institute at Scott College of Business at Indiana State University and the Shanghai Pujiang Talent Fund Program.
Publisher Statement
Copyright © The Journal of Risk and Insurance, 2011
Access to external full text or publisher's version may require subscription.
Additional Information
This article was presented at the ARIA meetings 2009 in Providence, Rhode Island.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Cheng, J., Elyasiani, E., & Jia, J. (2011). Institutional ownership stability and risk taking: Evidence from the life-health insurance industry. Journal of Risk and Insurance, 78(3), 609-641. doi: 10.1111/j.1539-6975.2011.01427.x