Does Property Rights Protection Affect Corporate Risk Management Strategy? Intra- and Cross-Country Evidence

52 Pages Posted: 23 Mar 2011

See all articles by Chen Lin

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Ping Lin

Lingnan University - Department of Economics

Hong Zou

The University of Hong Kong - Faculty of Business and Economics

Date Written: March 16, 2011

Abstract

Recent studies in the law and finance literature have shown that property rights protection is central to corporate financing and investment decisions and economic growth at large. We extend this literature by examining the effect of property rights security on corporate risk management decisions - an important element of a firm’s business strategy. Using a unique dataset covering 56,000 Chinese manufacturing firms and employing both institution- and firm-level measures of property rights security, we find that secure property rights lead to higher corporate demand for property insurance, suggesting that property rights security is an important determinant of corporate risk management decisions. The effect of property rights protection on insurance consumption is also validated by a cross-country analysis that uses data from 93 countries over the period 1995-2008. Our study represents an initial attempt towards understanding the importance of property rights protection to corporate risk management decisions.

Suggested Citation

Lin, Chen and Lin, Ping and Zou, Hong, Does Property Rights Protection Affect Corporate Risk Management Strategy? Intra- and Cross-Country Evidence (March 16, 2011). Available at SSRN: https://ssrn.com/abstract=1788034 or http://dx.doi.org/10.2139/ssrn.1788034

Chen Lin

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

Pokfulam Road
Hong Kong
China

Ping Lin (Contact Author)

Lingnan University - Department of Economics ( email )

135 Xingang Xi Road
Tuen Mun
Guangzhou, Guangzhou 510275
China
(852)2616 7203 (Phone)
(852)2891 7940 (Fax)

Hong Zou

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

Hong Kong

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