Institutional ownership stability and risk taking : evidence from the life–health insurance industry
Journal of Risk and Insurance
American Risk and Insurance Association
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.
Financial support from the Networks Financial Institute at Scott College of Business at Indiana State University and the Shanghai Pujiang Talent Fund Program.
Copyright © The Journal of Risk and Insurance, 2011
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This article was presented at the ARIA meetings 2009 in Providence, Rhode Island.
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