Does One Size Fit All? Determinants of Insurer Capital Structure Around the Globe

44 Pages Posted: 15 Sep 2015 Last revised: 20 Sep 2015

See all articles by Muhammed Altuntas

Muhammed Altuntas

University of Cologne - Department of Risk Management and Insurance

Thomas Berry-Stölzle

University of Iowa - Department of Finance

Sabine Wende

University of Cologne - Faculty of Management, Economics and Social Sciences

Date Written: October 11, 2014

Abstract

As financial markets become more global, the question arises whether any country specific considerations are still relevant for insurance companies’ capital structure. This research examines this questions with firm-level data across a broad range of countries including those in developing markets. What we find is that the optimal capital structure of insurance companies is not homogeneous across countries. We find that country-level factors explain a substantial fraction of the cross-sectional variation in insurance companies’ capitalization levels. Our results add to the current policy discussion on global regulatory capital requirements. If insurer capital structure is not homogeneous across countries, a global capital standard – if desired – should take differences in the institutional environments across countries into account to avoid market distortions.

Keywords: Capital structure, international finance, regulation, financial institutions, insurance markets

JEL Classification: F33, G15, G22, G28, L51

Suggested Citation

Altuntas, Muhammed and Berry-Stölzle, Thomas and Wende, Sabine, Does One Size Fit All? Determinants of Insurer Capital Structure Around the Globe (October 11, 2014). Journal of Banking and Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2660626

Muhammed Altuntas

University of Cologne - Department of Risk Management and Insurance ( email )

Kerpener Str. 30
Cologne, D-50923
Germany

Thomas Berry-Stölzle (Contact Author)

University of Iowa - Department of Finance ( email )

Iowa City, IA 52242-1000
United States

Sabine Wende

University of Cologne - Faculty of Management, Economics and Social Sciences ( email )

Albertus-Magnus-Platz
Cologne, D-50923
Germany

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