The Demise of the Mutual Organizational Form: An Investigation of the Life Insurance Industry |
| |
| Authors: | OTGONTSETSEG ERHEMJAMTS J TYLER LEVERTY |
| |
| Institution: | 1. Otgontsetseg Erhemjamts is an Assistant Professor in the Department of Finance, Bentley University, Waltham, MA (E‐mail: oerhemjamts@bentley.edu).;2. J. Tyler Leverty is an Assistant Professor of Finance in the Henry B. Tippie College of Business, University of Iowa, Iowa City, IA (E‐mail: ty‐leverty@uiowa.edu). |
| |
| Abstract: | We investigate the role of organizational structure in financial services markets by examining the U.S. life insurance industry. Traditionally, stock and mutual life insurers were equally represented, but now the industry is mainly composed of stock firms. We find operational efficiency, access to capital, and tax savings are important determinants for this shift. The incentive to demutualize differs by the type of conversion: full demutualization is chosen for efficiency and access to capital reasons and partial conversion, using a mutual holding company, is chosen for tax savings. Firm operational efficiency improves after conversion. We also find the efficiency of the stock organizational form dominates that of the mutual structure during our sample period, 1995 to 2004. |
| |
| Keywords: | G2 G22 G34 L2 insurance organizational form demutualization efficiency tax |
|
|
