The strategic use of corporate insurance in China

Joy Yihui Jia, Mike Adams, Mike Buckle

Research output: Contribution to journalArticle

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Abstract

We use the agency theory to conduct a novel test of the strategic use of property insurance in China's corporate sector. With regard to our main test hypotheses, we find that the incidence of property insurance purchased is directly related to the degree of product–market competitiveness, and positively related to market liquidity and firms’ growth opportunities. However, the homogeneity of market operations is not statistically significant. In our second-stage Cragg regression, market liquidity becomes insignificant while firms’ growth opportunities are now inversely related to the amount of insurance purchased. Additionally, the homogeneity of market operations becomes significantly related to the corporate purchase of property insurance. Therefore, different factors (e.g. cost considerations) may influence the decisions to purchase property insurance and subsequently, the level of coverage provided. We argue that our results are relevant for companies in other emerging markets such as Eastern Europe and companies operating in more developed Western economies such as the European Union (EU).
LanguageEnglish
Pages675-694
Number of pages20
JournalThe European Journal of Finance
Volume17
Issue number8
DOIs
StatusPublished - Mar 2011

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Property insurance
Insurance
China
Homogeneity
Market liquidity
Purchase
Firm growth
Growth opportunities
Emerging markets
Business sector
Hypothesis test
Eastern Europe
Competitiveness
Agency theory
Product market
Factors
European Union
Costs

Cite this

The strategic use of corporate insurance in China. / Jia, Joy Yihui; Adams, Mike; Buckle, Mike.

In: The European Journal of Finance, Vol. 17, No. 8, 03.2011, p. 675-694.

Research output: Contribution to journalArticle

Jia, Joy Yihui ; Adams, Mike ; Buckle, Mike. / The strategic use of corporate insurance in China. In: The European Journal of Finance. 2011 ; Vol. 17, No. 8. pp. 675-694
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