IDEAS home Printed from https://ideas.repec.org/p/hal/wpaper/halshs-00386453.html
   My bibliography  Save this paper

Capital reserve policy, regulation and credibility in insurance

Author

Listed:
  • Renaud Bourlès

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse)

  • Dominique Henriet

    (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract

The aim of this paper is to analyze the need for capital and default regulation in insurance. Proponents of deregulation argue that these requirements are useless as insurers would hold enough capital as soon as the insured are fully informed about their default probability. Adding to the purpose the relationship between an insurer and her security holders (that is the issuance and dividend policy) we show that the second best capital reserve decided by the security holders is suboptimal whenever the return on cash inside the firm is smaller than outside. Because of limited commitment on recapitalization, disclosure of information may not be enough. Given these characteristics, State commitment to recapitalize could be an alternative regulation policy.

Suggested Citation

  • Renaud Bourlès & Dominique Henriet, 2009. "Capital reserve policy, regulation and credibility in insurance," Working Papers halshs-00386453, HAL.
    • Handle: RePEc:hal:wpaper:halshs-00386453
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00386453
    as

    Download full text from publisher

    File URL: https://shs.hal.science/halshs-00386453/document
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Rafael La Porta & Florencio Lopez‐de‐Silanes & Andrei Shleifer & Robert W. Vishny, 2000. "Agency Problems and Dividend Policies around the World," Journal of Finance, American Finance Association, vol. 55(1), pages 1-33, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zweifel Peter, 2019. "Planned Solvency III Regulation: Should It Be Adopted Outside the European Union?," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 13(1), pages 1-12, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Fidrmuc, Jana P. & Jacob, Marcus, 2010. "Culture, agency costs, and dividends," Journal of Comparative Economics, Elsevier, vol. 38(3), pages 321-339, September.
    2. Ilhan-Nas, Tulay & Okan, Tarhan & Tatoglu, Ekrem & Demirbag, Mehmet & Wood, Geoffrey & Glaister, Keith W., 2018. "Board composition, family ownership, institutional distance and the foreign equity ownership strategies of Turkish MNEs," Journal of World Business, Elsevier, vol. 53(6), pages 862-879.
    3. Huang-Meier, Winifred & Freeman, Mark C., 2015. "Aggregate dividends and consumption smoothing," International Review of Financial Analysis, Elsevier, vol. 42(C), pages 324-335.
    4. Chan-Jane Lin & Tawei Wang & Chao-Jung Pan, 2016. "Financial reporting quality and investment decisions for family firms," Asia Pacific Journal of Management, Springer, vol. 33(2), pages 499-532, June.
    5. Eric Haye, 2015. "Hedge Fund Ownership, Board Composition and Dividend Policy in the Telecommunications Industry," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 6(1), pages 111-118, January.
    6. Goergen, Marc & Renneboog, Luc & Correia da Silva, Luis, 2005. "When do German firms change their dividends?," Journal of Corporate Finance, Elsevier, vol. 11(1-2), pages 375-399, March.
    7. Imen Ghadhab, 2023. "Bonding, signaling theory and dividend policy: Evidence from multinational firms," Journal of Asset Management, Palgrave Macmillan, vol. 24(1), pages 69-83, February.
    8. Rudi Zulfikar & Nana Nofianti & Kurniasih Dwi Astuti & Meutia Meutia & Aldi Ramadan, 2020. "The Role of Ownership’s Concentration Moderating Dividend Policy Effects on Firm Value," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(2), pages 126-135.
    9. Young Mok Choi & Kunsu Park, 2019. "Foreign Ownership, Agency Costs, and Long-Term Firm Growth: Evidence from Korea," Sustainability, MDPI, vol. 11(6), pages 1-17, March.
    10. Qin, Wei & Liang, Quanxi & Jiao, Yan & Lu, Meiting & Shan, Yaowen, 2022. "Social trust and dividend payouts: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 72(C).
    11. Gugler, Klaus & Peev, Evgeni & Segalla, Esther, 2013. "The internal workings of internal capital markets: Cross-country evidence," Journal of Corporate Finance, Elsevier, vol. 20(C), pages 59-73.
    12. Toru Yoshikawa & Abdul A. Rasheed, 2010. "Family Control and Ownership Monitoring in Family‐Controlled Firms in Japan," Journal of Management Studies, Wiley Blackwell, vol. 47(2), pages 274-295, March.
    13. Z. Jun Lin & Shengqiang Liu & Fangcheng Sun, 2017. "The Impact of Financing Constraints and Agency Costs on Corporate R&D Investment: Evidence from China," International Review of Finance, International Review of Finance Ltd., vol. 17(1), pages 3-42, March.
    14. Ferrell, Allen & Liang, Hao & Renneboog, Luc, 2016. "Socially responsible firms," Journal of Financial Economics, Elsevier, vol. 122(3), pages 585-606.
    15. González, Maximiliano & Guzmán, Alexander & Pombo, Carlos & Trujillo, María Andréa, 2012. "Family involvement and dividend policy in listed and non-listed firms," Galeras. Working Papers Series 034, Universidad de Los Andes. Facultad de Administración. School of Management.
    16. Cao, Lihong & Du, Yan & Hansen, Jens Ørding, 2017. "Foreign institutional investors and dividend policy: Evidence from China," International Business Review, Elsevier, vol. 26(5), pages 816-827.
    17. Sereeparp Anantavrasilp & Abe de Jong & Douglas V. DeJong & Ulrich Hege, 2020. "Blockholder leverage and payout policy: Evidence from French holding companies," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 47(1-2), pages 253-292, January.
    18. Nenova, Tatiana, 2003. "The value of corporate voting rights and control: A cross-country analysis," Journal of Financial Economics, Elsevier, vol. 68(3), pages 325-351, June.
    19. Farooq Omar & Tabine Sonia, 2015. "Agency Problems and the Choice of Auditors: Evidence from the MENA Region," Review of Middle East Economics and Finance, De Gruyter, vol. 11(1), pages 79-97, April.
    20. Céspedes, Jacelly & González, Maximiliano & Molina, Carlos A., 2010. "Ownership and capital structure in Latin America," Journal of Business Research, Elsevier, vol. 63(3), pages 248-254, March.

    More about this item

    Keywords

    insurance; capital reserve; regulation; recapitalization;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:wpaper:halshs-00386453. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.