Product Market Competition and Corporate Demand for Insurance
This article shows through a simple model that there is a monotonic relation between the competitiveness of the product market and firms’ demand for insurance.The more competitive the product market is,the more likely firms competing in the market will acquire insurance or purchase full coverage.This holds true no matter whether firms exhibit risk aversion or not in their preferences.Investment in risk management prior to competition is used as a strategic commitment device in the product market competition.Firms optimize their risk management investment by balancing the strategic commitment benefit and the cost of insurance.Therefore,the “outside the box factors” such as the industry characteristics,the market environment and the competitive pressure are important ones shaping firms’ risk management strategies.This provides clear empirical implications for corporate investment in risk management and its relation to the product market environment.By focusing on primary insurers’ reinsurance purchases,we provide strong empirical support forthe theoretical predictions.
Corporate Demand for Insurance Risk Management Product Market Competition Strategic Commitment
LIU Zhiyong Hae Won Jung
Scott College of Business, Indiana State University, Terre Haute, IN, 47809 Robinson College of Business, Georgia State University, PO Box 4036, Atlanta, GA, 30302
国内会议
青岛
英文
152-176
2012-07-18（万方平台首次上网日期，不代表论文的发表时间）