Abstract

http://ssrn.com/abstract=1573059
 
 

References (47)



 
 

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Agency and Corporate Purchase of Insurance


Paul Ehling


BI - Norwegian Business School

Avner Kalay


Tel Aviv University - Faculty of Management; University of Utah - David Eccles School of Business

Shagun Pant


University of Iowa - Department of Finance

April 2013


Abstract:     
Consistent with the agency cost rational, this paper documents that managers having larger private benefits of control purchase more insurance to reduce their own exposure to the probability of left-tail outcomes and hence the volatility of the firm's cash flows. Private benefits of control are estimated by the market value of the right to vote (measured as the difference between the price of the stock and an equivalent synthetic stock that is constructed with options). Our results hold when we control for the probability of a control contest. We also find that firms with larger private benefits of control tend to use more debt.

Number of Pages in PDF File: 35

Keywords: private benefits of control, property insurance

JEL Classification: G22, G32, G33, G34, G35

working papers series


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Date posted: March 21, 2010 ; Last revised: April 15, 2013

Suggested Citation

Ehling, Paul and Kalay, Avner and Pant, Shagun, Agency and Corporate Purchase of Insurance (April 2013). Available at SSRN: http://ssrn.com/abstract=1573059 or http://dx.doi.org/10.2139/ssrn.1573059

Contact Information

Paul Ehling (Contact Author)
BI - Norwegian Business School ( email )
N-0442 Oslo
Norway
+47 46410505 (Phone)
Avner Kalay
Tel Aviv University - Faculty of Management ( email )
P.O. Box 39010
Ramat Aviv, Tel Aviv, 69978
Israel
972 3 6406298 (Phone)
972 3 6406330 (Fax)
University of Utah - David Eccles School of Business ( email )
1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States
801-581-5457 (Phone)
Shagun Pant
University of Iowa - Department of Finance ( email )
Iowa City, IA 52242-1000
United States
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