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Title: The determinants of the discretionary purchase of property insurance by publicly listed companies in the People's Republic of China
Author: Zou, H.
Awarding Body: University of Wales Swansea
Current Institution: Swansea University
Date of Award: 2003
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Prior studies have used financial economics-based theories (e.g. agency theory) to suggest factors other than owners' risk aversion to explain the motivations for the purchase of insurance by large and widely-held companies. Empirical evidence regarding these theoretical predictions, however, has hitherto been rather limited because of the difficulty in obtaining insurance data at firm level. Drawing a framework from agency theory, this study examines empirically the determinants of both the managerial decision to participate in property insurance and the extent (volume) of property insurance use in the People's Republic of China (PRC). The relation between corporate insurance decisions and five explanatory variables (i.e. managerial ownership, State ownership, leverage, investment opportunity set and firm size) representing the major constructs of agency theory is tested using a panel data set of 235 publicly listed Chinese companies for the period 1997-99. Generally consistent with what was hypothesized, the empirical results indicate that agency-theory based determinants (e.g. managerial ownership, leverage, investment opportunity set and firm size) appear to have important influences on the managerial propensity to insure and the extent of property insurance usage. Additionally, some agency theory-based determinants (e.g. managerial ownership, leverage and firm size) appear to interact with each other and so exert a joint influence on the corporate purchase of property insurance in China. Other firm-specific characteristics (e.g. risk profile and geographical location) also appear to explain some variations in the corporate purchase insurance in China. Moreover, the same determinant (e.g. leverage) could have a different impact on the property insurance participation and volume decisions. I find that cash-flow constraints in many Chinese publicly listed companies could help to explain such phenomena. A major contribution of this study is that the empirical results could assist corporate stakeholders to better gauge the current risk management practices in the Chinese corporate sector and help insurance suppliers to better target potential customers.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID:  DOI: Not available