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Is Catering Rewarded?: Evidence from the Insurance Industry

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  • Yu-Luen Ma

    (University of North Texas)

  • Yayuan Ren

    (Illinois State University)

Abstract

Ma and Ren (J Risk Insur 79(2):415–430) find that insurers cater to the market’s preference when making decisions on growth. In this paper, we further examine whether the catering behavior is rewarded by higher market valuation in both short term and long term and whether the catering involves greater risk. We find that insurers catering to the stock market’s preference receive a greater abnormal return in the short term, but not in the long term. Insurers that frequently cater are found to have higher volatility, smaller size and lower profitability, which deserves regulatory attention.

Suggested Citation

  • Yu-Luen Ma & Yayuan Ren, 2018. "Is Catering Rewarded?: Evidence from the Insurance Industry," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 43(3), pages 539-559, July.
    • Handle: RePEc:pal:gpprii:v:43:y:2018:i:3:d:10.1057_s41288-017-0070-3
    DOI: 10.1057/s41288-017-0070-3
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