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Can Independent Distribution Function as a Mode of Corporate Governance?: An Examination of the UK Life Insurance Market

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  • Damian Ward

Abstract

This paper examines whether independent modesof distribution can act as effective externalmonitors of managerial action. Becauseindependent agents are owners of the clientlist, control of an essential cash-generatingasset is concentrated in the hands of informedpurchasers. A consequence of this concentrationis the ability of independent agents tochastise bad management by moving customers toalternative management teams. Therefore,insurance companies that use independent agentsshould exhibit lower levels of opportunisticbehaviour. By studying 42 UK life insurancecompanies over the period 1990–1997 this studyprovides evidence that independent agents doreduce life companies' free cash flow,managerial expenses and shareholder dividends,while increasing policyholders' reserves. Copyright Kluwer Academic Publishers 2003

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  • Damian Ward, 2003. "Can Independent Distribution Function as a Mode of Corporate Governance?: An Examination of the UK Life Insurance Market," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 7(4), pages 361-384, December.
    • Handle: RePEc:kap:jmgtgv:v:7:y:2003:i:4:p:361-384
    DOI: 10.1023/A:1026237430362
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    References listed on IDEAS

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    1. Berger, Allen N & Cummins, J David & Weiss, Mary A, 1997. "The Coexistence of Multiple Distribution Systems for Financial Services: The Case of Property-Liability Insurance," The Journal of Business, University of Chicago Press, vol. 70(4), pages 515-546, October.
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    Cited by:

    1. Martina Eckardt & Solvig Räthke‐Döppner, 2010. "The Quality of Insurance Intermediary Services—Empirical Evidence for Germany," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 77(3), pages 667-701, September.
    2. Damian Ward & Igor Filatotchev, 2010. "Principal-principal-agency relationships and the role of external governance," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 31(4), pages 249-261.
    3. Hui-Hsuan Liu & Chin-Chi Liu, 2020. "The Economic Freedom, Corporate Governance and Risk-taking Behavior: Evidence from the European Life Insurance Industry," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 10(5), pages 1-5.

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