Dividend Decisions in the Property & Liability Insurance Industry: Mutual Versus Stock Companies

36 Pages Posted: 3 Aug 2010 Last revised: 30 Sep 2013

See all articles by Hong Zou

Hong Zou

The University of Hong Kong - Faculty of Business and Economics

Charles C. Yang

Florida Atlantic University

Mulong Wang

University of Texas at Austin

Minglai Zhu

Nankai School of Business

Date Written: May 13, 2008

Abstract

This article examines the effect of organizational forms on corporate dividend decisions by exploring the differences in dividend payout ratios between mutual and stock property-liability (P-L) insurers in the U.S. Our large sample evidence suggests: a) mutual insurers tend to have a lower dividend payout ratio than stock insurers and the observed difference is about 4 percentage points, holding other factors constant; b) mutual insurers tend to adjust dividend payout ratios toward their long-run target levels more slowly than stock firms. These results are consistent with the capital constraints and/or greater agency costs of equity in mutual insurers.

Suggested Citation

Zou, Hong and Yang, Charles C. and Wang, Mulong and Zhu, Minglai, Dividend Decisions in the Property & Liability Insurance Industry: Mutual Versus Stock Companies (May 13, 2008). Review of Quantitative Finance and Accounting, Vol. 33, No. 2, 2009, Available at SSRN: https://ssrn.com/abstract=1652167

Hong Zou (Contact Author)

The University of Hong Kong - Faculty of Business and Economics ( email )

China

Charles C. Yang

Florida Atlantic University ( email )

777 Glades Road
Boca Raton, FL 33431
United States

Mulong Wang

University of Texas at Austin ( email )

2317 Speedway
Austin, TX 78712
United States

Minglai Zhu

Nankai School of Business ( email )

94 Weijin Road, Nankai District
Tianjin, Tianjin 300071
China

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