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Dividend decisions in the property and liability insurance industry: mutual versus stock companies |
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| Authors: | Hong Zou Chuanhou Yang Mulong Wang Minglai Zhu | ||
| Affiliation: | (1) Department of Economics and Finance, City University of Hong Kong, 83 Tat Chee Avenue, Kowloon Tong, Kowloon, Hong Kong, China;(2) School of Finance, Insurance, and Economics, Florida Atlantic University, 777 Glades Road, Boca Raton, FL 33431, USA;(3) Grange Mutual Insurance Company, Columbus, OH 43202, USA;(4) School of Business Administration, Nankai University, Tianjin, China | ||
| Abstract: | This article examines the effect of organizational forms on corporate dividend decisions by exploring the differences in dividend payout ratios between mutual and stock property–liability (P–L) insurers in the US. Our large sample evidence suggests: (1) mutual insurers tend to have a lower dividend payout ratio than stock insurers and the observed difference is about 4% points, holding other factors constant; (2) mutual insurers tend to adjust dividend payout ratios toward their long-run target levels more slowly than stock firms. These results are consistent with the capital constraints and/or greater agency costs of equity in mutual insurers.
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| Keywords: | Dividend decisions Property– liability insurance Mutual and stock insurers Capital structure Capital constraints Agency theory | ||
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