Title

The corporate purchase of property insurance : Chinese evidence

Document Type

Journal article

Source Publication

Journal of Financial Intermediation

Publication Date

4-1-2006

Volume

15

Issue

2

First Page

165

Last Page

196

Keywords

Agency theory, Corporate sector, People's Republic of China, Property insurance

Abstract

Using a panel data set (1997-1999) for 235 publicly listed companies in the People's Republic of China (PRC), this study tests empirically whether the purchase of property insurance mitigates principal-agent (agency) incentive conflicts. In contrast to prior studies, we first estimate a probit insurance participation decision model and then a fixed-effects insurance volume decision model (with Heckman's sample selection correction) in order to shed light on the determinants of both property insurance participation and volume decisions. Our results suggest that a major motivation for the corporate purchase of insurance in China appears to be the mitigation of agency conflicts. Additionally, various ownerships seem to have different impacts on the corporate purchase of insurance in China. Moreover, the results show that the same factor can have different impacts on the insurance participation and volume decisions, and that binding financial conditions may be a key factor accounting for such observed differences.

DOI

10.1016/j.jfi.2004.06.007

Print ISSN

10429573

Funding Information

Financial support from the Association of British Insurers.

Publisher Statement

Copyright © 2004 Elsevier Inc. All rights reserved. Access to external full text or publisher's version may require subscription.

Full-text Version

Publisher’s Version

Recommended Citation

Zou, H., & Adams, M. B. (2006). The corporate purchase of property insurance: Chinese evidence. Journal of Financial Intermediation, 15(2), 165-196. doi: 10.1016/j.jfi.2004.06.007

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