The Analysis of Capital Structure for Property-Liability Insurers: a Quantile Regression Approach

• Autorzy: Jessica Hung , Vincent Y. L. Chang
• Języki publikacji: EN

Abstrakty

EN

By using a two-stage quantile regression approach (2SQR), this study demonstrates how the insurer's leverage is determined across various quantiles. The evidence shows that the influence of the business concentration and marketing channel at the lower leverage quantiles is opposite to that at the higher leverage quantiles, which proposes that the mean effects of the two-stage ordinary least squares method are insufficient to capture the effects of business strategies on the insurer's capital structure determination. Moreover, the 2SQR evidence also shows that the magnitude of the impacts for some determinations varies among the different leverage quantiles. In sum, the evidence suggests that these two competing approaches should be viewed as complementary functions when discussing the insurer's capital structure. (original abstract)

Słowa kluczowe

EN

Financial leverage; Capital structure; Developing countries; Quantile regression

PL

Dźwignia finansowa; Struktura kapitału; Kraje rozwijające się; Regresja kwantylowa

• Czasopismo: Business and Economic Horizons
• Rocznik: 2018
• Numer: vol. 14, iss. 4
• Strony: 829--850

Twórcy

autor

Jessica Hung

• National Changhua University of Education, Taiwan

autor

Vincent Y. L. Chang

• Feng Chia University, Taiwan

Bibliografia

• Adiel, R. (1996). Reinsurance and the management of regulatory ratios and taxes in the property-casualty insurance industry. Journal of Accounting and Economics, 22(1-3), 207-240.
• Amemiya, T. (1982). Two stage least absolute deviations estimators. Econometrica, 50(3), 689-712.
• Baker, M., & Wurgler, J. (2002). Market timing and capital structure. Journal of Finance, 57(1), 1- 32.
• Baranoff, E. G., & Sager, T. (2002). The relationship among asset risk, product risk, and capital in the life insurance industry. Journal of Banking and Finance, 26(6), 1181-1197.
• Baranoff, E. G., & Sager, T. (2003). The relationship among organizational and distribution forms and capital and asset risk structures in the life insurance industry. Journal of Risk and Insurance, 70(3), 375-400.
• Blundell, R. W., & Powell, J. L. (2007). Censored regression quantiles with endogenous regressors. Journal of Econometrics, 141(1), 65-83.
• Born, P. H., Viscusi, W. K., & Carlto, D. W. (1998). The distribution of the insurance market effects of tort liability reforms. Brookings Papers on Economic Activity, Microeconomics, 1998, 55-105.
• Bruinshoofd, W. A., & Kool, C. (2002). The determinants of corporate liquidity in the Netherlands. SSRN Working Paper. http://dx.doi.org/10.2139/ssrn.300698
• Centeno, M., & Novo, A. A. (2006). The impact of unemployment insurance generosity on match quality distribution. Economics Letters, 93(2), 235-241.
• Chang, V. Y. (2015). Determinants of the demand for reinsurance for U.S. property-liability insurance industry: Quantile regression analysis. Management Review, 34(4), 125-138.
• Chang, V. Y., & Tsai, J. Z. (2014). Quantile regression analysis of corporate liquidity: Evidence from U.S. property-liability insurance industry. The Geneva Papers on Risk and Insurance: Issues and Practice, 39(1), 77-89.
• Chang, V. Y., & Jeng, V. S. (2016). The relationships among the demand for reinsurance, liquidity, and leverage in the U. S. property-liability insurance industry. Taiwan Economic Review, 44(4), 543-576.
• Chen, Y., Hamwi, I. S., & Hudson, T. (2001). The effect of ceded reinsurance on solvency of primary insurers. International Advances in Economic Research, 7(1), 65-82.
• Chen, L. A., & Portnoy, S. (1996). Two-stage regression quantiles and two-stage trimmed least squares estimators for structural equation models. Communication in Statistics - Theory and Methods, 25(5), 1005-1032.
• Chou, S. Y., Liu, J. T., & Hammitt, J. K. (2003). National Health insurance and precautionary saving: Evidence from Taiwan. Journal of Public Economics, 87(9-10), 1873-1894.
• Cole, C. R., & McCullough, K. A. (2006). A reexamination of the corporate demand for reinsurance. Journal of Risk and Insurance, 73, 169-192.
• Cummins, J. D., & Nini, G. P. (2002). Optimal capital utilization by financial firms: Evidence from the property-liability insurance industry. Journal of Financial Services Research, 21(Issues 1-2), 15-53.
• Cummins, J. D., & Sommer, D. W. (1996). Capital and risk in property-liability insurance markets. Journal of Banking and Finance, 20(6), 1069-1092.
• de Haan, L. (1997). Financial behavior of the Dutch corporate sector. Amsterdam: Thesis Publishers.
• Ees, H. V., Garretsen, H., Haan, L. D., & Sterken, S. (1998). Investment and debt constraints: Evidence from Dutch panel data. In S. Brakman, H. van Ees and S. K. Kuipers (Eds.). Market Behaviour and Macroeconomic Modelling (pp. 159-17). London: Palgrave Macmillan.
• Fama, E., & French, K. (2002). Testing trade-off and pecking order predictions about dividends and debt. Review of Financial Studies, 15(1), 1-33.
• Fattouh, B., Harris, L., & Scaramozzino, P. (2005). Capital structure in South Korea: A quantile regression approach. Journal of Development Economics, 76(1), 231-250.
• Fattouh, B., Scaramozzino, P., & Harris, L. (2008). Non-linearity in the determinants of capital structure: Evidence from UK Firms. Empirical Economics, 34(3), 417-438.
• Faulkender, M. W. (2002). Cash holdings among small businesses. SSRN Working Paper. http://dx.doi.org/10.2139/ssrn.305179
• Ferreira, M. A., & Vilela, V. S. (2004). Why do firms hold cash? Evidence from EMU countries. European Financial Management, 10(2), 295-319.
• Fir, S. G., McCollough, K. A., & Carson, J. M. (2013). Internal capital markets and the partial adjustment of leverage. Journal of Banking and Finance, 37(3), 1029-1039.
• Frank, M., & Goyal, V. (2003). Testing the pecking order theory of capital structure. Journal of Financial Economics, 67(2), 217-48.
• Frank, M., & Goyal, V. (2009). Capital structure decisions: Which factors are reliably important? Financial Management, 38(1), 1-37.
• Garven, J. R., & Lamm-Tennant, J. (2003). The demand for reinsurance: Theory and empirical tests. Insurance and Risk Management, 7(3), 217-238.
• Gaver, J. J., & Paterson, J. S. (2004). Do insurers manipulate loss reserves to mask solvency problems? Journals of Accounting and Economics, 37(3), 393-416.
• Grace, M. F., & Leverty, J. T. (2012). Property-liability insurer reserve error: Motive, manipulation, or mistake. Journal of Risk and Insurance, 79(2), 351-380.
• Gropp, R., & Heider, F. (2010). The determinants of bank capital structure. Review of Finance, 14(4), 587-622.
• Harrington, S. E., & Neihaus, G. (2002). Capital structure decisions in the insurance industry: Stocks versus mutual. Journal of Financial Services Research, 21(1-2), 145-163.
• Huang, R., & Ritter, J. (2009). Testing the market timing theory of capital structure and estimating the speed of adjustment. Journal of Financial and Quantitative Analysis, 44(2), 237-71.
• Imbens, G. W., & Newey, W. K. (2009). Identification and estimation of triangular simultaneous equation models without additivity. Econometrica, 77(5), 1481-1512.
• John, T. A. (1993). Accounting measures of corporate liquidity, leverage, and costs of financial distress. Financial Management, 22(3), 91-100.
• Kalcheva, I., & Lins, K. V. (2007). International evidence on cash holdings and expected managerial agency problems. Review of Financial Studies, 20(4), 1087-1112.
• Kim, C. S., Mauer, D. C., & Sherman, A. E. (1998). The determinants of corporate liquidity: Theory and evidence. Journal of Financial and Quantitative Analysis, 33(3), 335-359.
• Kim, T. H., & Muller, C. (2004). Two-stage quantile regression when the first stage is based on quantile regression. Econometrics Journal, 7(1), 218-231.
• Koenker, R., & Bassett, G. (1978). Regression quantiles. Econometrica, 46(1), 33-50.
• Lee, S. (2007). Endogeneity in quantile regression models: A control function approach. Journal of econometrics, 141(2), 1131-1158.
• Lai, Y. H. & Hsu, W. (2009). The relationship between capital and risk in Taiwan banking industry: Quantile regression analysis. Journal of Management, 26(4), 377-389.
• Margaritis, D. & Psillaki, M. (2007). Capital structure and firm efficiency. Journal of Business Finance and Accounting, 34(9), pp.1447-1469.
• Margaritis, D., & Psillaki, M. (2010). Capital structure, equity ownership and firm performance. Journal of Banking and Finance, 34(3), pp.621-632.
• Mayers, D., & Smith, C. (1988). Ownership structure across lines of property-casualty insurance. Journal of Law and Economics, 31(2), 351-378.
• Mayers, D., & Smith, C. (1990). On the corporate demand for insurance: Evidence from the reinsurance market. Journal of Business, 63(1), 19-40.
• Mayers, D. & Smith, C. (1994). Managerial discretion, regulation, and stock Insurer ownership structure. Journal of Risk and Insurance, 61(4), 638-655.
• McCullough, K. A. & Epemanis, K. (2007). An analysis of property-casualty insurance company defense expenditures. SSRN Working Paper. http://dx.doi.org/10.2139/ssrn.1065996
• Myers, S. C. & Majluf, N. S. (1984). Corporate financing and investment decisions when firms have information that investors do not have. Journal of Financial Economics, 13(2), 187-221.
• Opler, T., Pinkowitz, L., Stulz, R., & Williamson, R. (1999). The determinants and implications of corporate cash Hhldings. Journal of Financial Economics, 52, 3-46.
• Panno, A. (2003). An empirical investigation on the determinants of capital structure: The UK and Italian experience. Applied Financial Economics, 13(2), 97-112.
• Petroni, K. R. (1992). Optimistic reporting in the property-casualty insurance industry. Journal of Accounting and Economics, 15(4), 485-508.
• Pitselis, G. (2009). Solvency supervision based on a total balance sheet approach. Journal of computational and Applied Mathematics, 233(1), 83-96.
• Powell, J. (1983). The asymptotic normality of two stage least absolute deviations estimators. Econometrica, 51(5), 1569-1575.
• Regan, L. (1997). Vertical integration in the property-liability insurance industry: A transaction cost approach. Journal of Risk and Insurance, 64(1), 41-62.
• Sanchez-Vidal, F. J. (2014). High debt companies' leverage determinants in Spain: A quantile regression approach. Economic Modelling, 36(2014), 455-465.
• Schaeck, K. (2008). Bank liability structure, FDIC loss, and time to failure: A quantile regression approach. Journal of Financial Services Research, 33(3), 163-179.
• Shi, P., & E. W. Frees (2010). Long-tail longitudinal modeling of insurance company expenses. Insurance: Mathematics and Economics, 47(3), 303-314.
• Shiu, Y. M. (2006). Corporate liquidity: Evidence from the United Kingdom life insurance industry. Applied Economics Letters, 13(15), 993-998.
• Shiu, Y. M. (2011). Reinsurance and capital structure: Evidence from the United Kingdom Non-life insurance industry. Journal of Risk and Insurance, 78(2), 475-494.
• Shyam-Sunder, L., & Myers, S. (1999). Testing static trade-off against pecking order models of capital structure. Journal of Financial Economics, 51(2), 219-43.
• Titman, S. & Wessels, R. (1988). The determinants of capital structure. Journal of Finance, 43(1), 1-19.
• Viscus, W. K., & Born, P. H. (2005). Damages caps, insurability, and the performance of medical malpractice insurance. Journal of Risk and Insurance, 72(1), 23-43.
• Wang, J., Chang, V. Y., Lai, G. C., & Tzeng, L. Y. (2008). Demutualization and demand for reinsurance. The Geneva Papers on Risk and Insurance: Issues and Practice, 33(3), 566-584.
• Weiss, M. (1985). A multivariate analysis of loss reserving estimates in property-liability insurers. Journal of Risk and Insurance, 52(2), 199-221.
• Weiss, M., & Cheng, J. (2012). Capital structure in the property-liability insurance industry: Tests of the tradeoff and pecking order theories. Journal of Insurance Issues, 35(1), 1-43.
• Welch, I. (2004). Capital structure and stock returns. Journal of Political Economy, 112(1), 106-131.
• Yanase, N., & Limpaphayom, P. (2017). Organization structure and corporate demand for reinsurance: The case of the Japanese Keiretsu. Journal Risk and Insurance, 84(2), 599-629.

Identyfikatory

DOI

10.15208/beh.2018.57