Orderbook demand for corporate bonds

We examine the determinants of investor demand for corporate bond offerings using novel data on the primary market orderbook size. We find that credit risk and bond market presence are significant in explaining investor demand. These effects are more pronounced during the crisis periods including the global financial crisis and eurozone crisis as well as during the postcrisis periods. Our results also highlight the size of the bond investor order depends on information asymmetry costs and the benefit of diversifications, as investor demand is lower for new issuers as well as very frequent issuers. The levels of investor demand have important economic consequences for bond issuers as high investor demand shortens the time to subsequent bond issues and potentially reduces the firm's cost of capital at issuance.     

Financing seasonal demand

This paper identifies seasonal firms and their peak seasons to provide empirical evidence of the approach these firms take to finance seasonal operations. The seasonal use of funds, which builds before seasonal revenue, is largely financed with transitory sources of credit, such as credit lines, trade credit, and commercial paper. Permanent financing is used only moderately to meet seasonal needs. However, both weak credit market conditions and firm-level financial constraints limit the ability of seasonal firms to use debt as transitory financing. These frictions result in a partial shift to permanent financing but reduce the seasonal use of funds overall.     

Income heterogeneity and index insurance demand

Weather index insurance as a tool to insure the income of agriculturally active households has triggered extensive discussions in the literature. Despite the convincing theoretical argumentation, the demand for these products stays behind expectations. Several studies revealed effects impacting the demand for index insurance, such as liquidity constraints, basis risk, lack of understanding and trust in insurers and products alike. This paper takes a different perspective and hypothesizes that low demand is due to heterogeneous risk exposure towards weather variability among potential insured. The paper tests the impact of income heterogeneity as a measure of risk exposure on insurance demand and finds that risk exposure negatively affects insurance demand. In order to increase demand, it is concluded that product design should emphasize more the importance of income risk composition and exposure of potentially insured.     

Life insurance demand and borrowing constraints

The literature devoted limited attention to exploring the relationship between financial development and life insurance demand. Financial development supports life insurance supply by providing confidence in the financial system, more efficient payment systems, and higher availability of financial instruments. However, financial development reduces households' needs to save by relaxing borrowing constraints, indirectly affecting life insurance demand. We contribute by providing a demand‐driven explanation of the negative consequences of financial development on life insurance development. We find that more credit‐constrained countries have higher life insurance penetration on average. Indirectly, the role of borrowing constraints signifies the importance of life insurance policies as a financing tool in case of the realization of various background risks. This study integrates the knowledge from life insurance theory, life insurance lapse, policy loans demand, and saving under liquidity constraints literature and produces implications for researchers, policymakers, and life insurers.     

Institutional demand pressure and the cost of corporate loans

Between 2001 and 2007, annual institutional funding in highly leveraged loans went up from $32 billion to $426 billion, accounting for nearly 70% of the jump in total syndicated loan issuance over the same period. Did the inflow of institutional funding in the syndicated loan market lead to mispricing of credit? To understand this relation, we look at the institutional demand pressure defined as the number of days a loan remains in syndication. Using market-level and cross-sectional variation in time-on-the-market, we find that a shorter syndication period is associated with a lower final interest rate. The relation is robust to the use of institutional fund flow as an instrument. Furthermore, we find significant price differences between institutional investors’ tranches and banks’ tranches of the same loans, even though they share the same underlying fundamentals. Increasing demand pressure causes the interest rate on institutional tranches to fall below the interest rate on bank tranches. Overall, a one-standard-deviation reduction in average time-on-the-market decreases the interest rate for institutional loans by over 30 basis points per annum. While this effect is significantly larger for loan tranches bought by collateralized debt obligations (CDOs), it is not fully explained by their role.     

CRM:保险企业发展之道

对于服务渠道多样并具有多重复杂性的保险企业而言,CRM因其"以客户为中心"的出发点正契合了保险企业的经营理念。我国保险企业仍处于快速的发展阶段,如何进行管理和业务流程的革新以适应开放市场中日益激烈的竞争,成功地实施CRM并得以落实应用无疑是有效的方法之一。本期我们就保险企业CRM进行一些探讨,业界专家和学者从不同角度分析了保险企业如何实施CRM及其实施的方法。我们殷切地希望广大读者能就此话题,或从保险业界信息化角度与我们进行进一步的深入交流和沟通。     

Firm's demand for insurance: An explorative approach

This paper addresses the question, what influences the insurance demand of companies and examines the influence of managerial risk aversion in this decision process. An explorative research approach based on qualitative data analysis is applied to explore the factors influencing the insurance related decision behavior in organizations. Using interviews and observations of firm's insurance managers, the results identify interdependencies between factors of insurance demand, such as ownership structure, managerial discretion, volatility of earning, size, services of the insurer, and business diversification which allows to propose a framework of contextual factors affecting company's insurance demand. Within this framework, the data imply managerial risk attitudes as decisive factor in the decision process about insurance demand in companies. This explorative study enriches the existing theories of firms’ insurance demand and addresses feedback from practice into theory.     

Corporate demand for insurance: Some empirical and theoretical results

While risk aversion explains individual consumer demand for insurance, it does not explain the corporate demand for insurance. Studies have suggested a variety of incentives that motivate corporations to purchase insurance. We find that the primary motivation for corporate insurance purchases can be explained by the bondholder's me-first rule. In return for insurance, bondholders will charge stockholders a lower cost of debt, thereby increasing firm value.     

A note on increased probability of loss and the demand for insurance

It is shown that the effect of increased probability of loss on the demand for insurance depends on whether both insured and insurer are aware of the change. When both insurer and insured share the same beliefs about the probability of loss (symmetric information), an increase in the loss probability may lead risk-averse agents to demandless insurance.     

The strategic use of corporate venture financing for securing demand

This paper focuses on the strategic role of corporate venture financing carried out by a corporation (a headquarter). When the headquarter finances a venture through its corporate venture-financing arm, it can increase the complementarity between products of the venture and the headquarter. The effect of having an increase in complementarity is a softening of ex post product market competition with rival products. Hence, in deciding whether to finance the venture, the headquarter faces a trade-off between, on the one hand, being more aggressive ex post in the product market, and, on the other hand, using venture financing to soften ex post competition with substitute products.     

Capital, corporate income taxes, and catastrophe insurance

We provide estimates of the equity capital needed and the resulting tax costs incurred when supplying catastrophe insurance/reinsurance using a partial equilibrium model that incorporates a specific loss distribution for US catastrophe losses. After consideration of insurer investment in tax-exempt securities, tax loss carry-back/forward provisions, and personal taxes, our results imply that the tax costs of equity finance alone have a substantial effect on the cost of supplying catastrophe reinsurance. These results help explain a variety of industry developments that reduce tax costs. Also, when coupled with non-tax costs of capital, these results help explain the limited scope of catastrophe insurance/reinsurance.     

Reinsurance and corporate taxation in the United Kingdom life insurance industry

There are two main tax-related arguments regarding the use of reinsurance – the income volatility reduction and the income level enhancement arguments. The income volatility reduction argument contends that firms facing convex tax schedules have incentives to hedge in order to reduce the volatility of their annual taxable income and thereby lower expected tax liabilities [Smith, C.W., Stulz, R.M., 1985. Optimal hedging policies. Journal of Financial and Quantitative Analysis 19, 127–140]. The income level enhancement argument, advanced by Adiel [Adiel, R., 1996. Reinsurance and the management of regulatory ratios and taxes in the property–casualty insurance industry. Journal of Accounting and Economics 22, 207–240], is more specific to hedging via reinsurance. This perspective holds that reinsurance enhances current reported earnings via the receipt of reinsurance commissions and so increases tax liabilities. Consequently, insurance firms with high marginal tax rates should use less reinsurance than those with low marginal tax rates if tax matters. Prior studies using data on financial derivatives have produced mixed results on the validity of the first argument, while Adiel (1996) finds the second argument insignificant in his study of the use of reinsurance by a sample of United States (US) property–liability insurance firms. This study tests the two tax-related arguments using 1992–2001 data for a sample of United Kingdom (UK) life insurance firms. We find that UK life insurers with low before-planning marginal tax rates tend to use more reinsurance; in contrast, tax convexity is found to have no significant impact on the purchase of reinsurance and so the volatility-reduction argument is not supported.     

Financing constraints, cash-flow risk, and corporate investment

Using an analytically tractable two-period model of a financially constrained firm, we derive an investment threshold that is U-shaped in cash holdings. We show analytically the relevant trade-offs leading to the U-shape: the firm balances financing costs for present and future investment, respectively. Our main argument is that financing costs today are more important than the risk of future financing costs. The empirically testable implications are that low-cash firms facing financing costs today are more reluctant to invest if they have less cash, or if their future cash flows are more risky. On the other hand, cash-rich firms facing no financing costs today invest in less favorable projects (i.e., forgo their real option to wait) if they have less cash, or if their future cash flows are more risky. The magnitude of these effects is amplified by the degree of market frictions that the firms are facing.     

The strategic use of corporate insurance in China

We use the agency theory to conduct a novel test of the strategic use of property insurance in China's corporate sector. With regard to our main test hypotheses, we find that the incidence of property insurance purchased is directly related to the degree of product–market competitiveness, and positively related to market liquidity and firms’ growth opportunities. However, the homogeneity of market operations is not statistically significant. In our second-stage Cragg regression, market liquidity becomes insignificant while firms’ growth opportunities are now inversely related to the amount of insurance purchased. Additionally, the homogeneity of market operations becomes significantly related to the corporate purchase of property insurance. Therefore, different factors (e.g. cost considerations) may influence the decisions to purchase property insurance and subsequently, the level of coverage provided. We argue that our results are relevant for companies in other emerging markets such as Eastern Europe and companies operating in more developed Western economies such as the European Union (EU).     

保险企业IT项目的绩效评估和管理

IT项目绩效评估与管理是从IT项目出发,明确项目成本的确定标准,量化项目产生的绩效,通过项目管理,提升项目绩效。开展IT项目绩效管理,强化IT成本意识,合理控制IT成本,提高IT绩效,逐步建立科学合理的绩效评估及管理体系,是保险企业信息化发展的必然之路。     

The effect of overconfidence on insurance demand

The Geneva Risk and Insurance Review - Sandroni and Squintani (Am Econ Rev 97(5):1994–2004, 2007) argue that in the presence of overconfident agents, the findings of Rothschild and Stiglitz...     

Guaranteed renewable life insurance under demand uncertainty

Guaranteed renewability (GR) is a prominent feature in many health and life insurance markets. We develop a model that includes unpredictable (and unobservable) fluctuations in demand for life insurance as well as changes in risk type (observable) over individuals' lifetimes. The presence of demand type heterogeneity leads to the possibility that optimal GR contracts may have a renewal price that is either above or below the actuarially fair price of the lowest risk type in the population. Individuals whose type turns out to be high risk but low demand renew more of their GR insurance than is efficient due to the attractive renewal price. This results in imperfect insurance against reclassification risk. Although a first‐best efficient contract is not possible in the presence of demand type heterogeneity, the presence of GR contracts nonetheless improves welfare relative to an environment with only spot markets.     

数据挖掘技术在保险企业CRM系统建设中的应用

中国加入WTO,意味着中国保险业将全面地与国际保险体系接轨,这既是一个发展的机遇同时也是一个严峻的考验。入世后国内保险行业面临的最大问题就是寻找一条合理、有效的经营管理模式,利用本土化的     

The corporate purchase of property insurance: Chinese evidence

Using a panel data set (1997–1999) for 235 publicly listed companies in the People's Republic of China (PRC), this study tests empirically whether the purchase of property insurance mitigates principal-agent (agency) incentive conflicts. In contrast to prior studies, we first estimate a probit insurance participation decision model and then a fixed-effects insurance volume decision model (with Heckman's sample selection correction) in order to shed light on the determinants of both property insurance participation and volume decisions. Our results suggest that a major motivation for the corporate purchase of insurance in China appears to be the mitigation of agency conflicts. Additionally, various ownerships seem to have different impacts on the corporate purchase of insurance in China. Moreover, the results show that the same factor can have different impacts on the insurance participation and volume decisions, and that binding financial conditions may be a key factor accounting for such observed differences.     

Adverse selection in the annuity market with sequential and simultaneous insurance demand

This paper investigates the effect of adverse selection on the private annuity market in a model with two periods of retirement and two types of individuals, who differ in their life expectancy. In order to introduce the existence of time-limited pension insurance, we consider a model where for each period of retirement separate contracts can be purchased. Demand for the two periods can be decided sequentially or simultaneously. We show that only a situation where all risk types choose sequential contracts is an equilibrium and that this outcome is favourable for the long-living, but is unfavourable for the short-living individuals. JEL Classification D82 · D91 · G22