Institutional Ownership Stability and Risk Taking: Evidence from the Life–Health Insurance Industry

33 Pages Posted: 27 Aug 2011

See all articles by Jiang Cheng

Jiang Cheng

Shanghai Jiao Tong University (SJTU)

Elyas Elyasiani

Temple University - Department of Finance

Jingyi Jia

Southern Illinois University at Edwardsville - Department of Economics & Finance

Date Written: September 2011

Abstract

We investigate the relationship between risk taking of life–health (LH) insurers and stability of their institutional ownership within a simultaneous equation system model. Three main results are obtained. First, stable institutional ownership of is associated with lower total risk of LH insurers, supporting the prudent‐man law hypothesis. Second, when investors are sorted in terms of stringency of the prudent‐man restrictions, their negative effect on risk holds for all, except insurance companies, as owners of LH insurers. Third, large institutional owners do not raise the riskiness of the investee‐firms, as proposed by the large shareholder hypothesis. Regulatory implications are drawn.

Suggested Citation

Cheng, Jiang and Elyasiani, Elyas and Jia, Jingyi, Institutional Ownership Stability and Risk Taking: Evidence from the Life–Health Insurance Industry (September 2011). Journal of Risk and Insurance, Vol. 78, Issue 3, pp. 609-641, 2011. Available at SSRN: https://ssrn.com/abstract=1917914 or http://dx.doi.org/10.1111/j.1539-6975.2011.01427.x

Jiang Cheng

Shanghai Jiao Tong University (SJTU) ( email )

KoGuan Law School
Shanghai 200030, Shanghai 200052
China

Elyas Elyasiani

Temple University - Department of Finance ( email )

Fox School of Business and Management
Philadelphia, PA 19122
United States
215-204-5881 (Phone)
215-204-5698 (Fax)

Jingyi Jia

Southern Illinois University at Edwardsville - Department of Economics & Finance ( email )

Edwardsville, IL 62026
United States

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