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
Language
English
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