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.     

A Different Look at Commercial Real Estate Returns

Commercial real estate makes up a relatively small percentage of most institutional portfolios, even though the existing literature has consistently reported attractive risk-return characteristics that would suggest much larger allocations. This discrepancy has been explained by a perceived lack of comparability between return series calculated for real estate and those calculated for other asset classes. Just as investors actively involved in the futures markets do not consider individual common stocks to be traded continuously, those active in the stock market do not consider real estate to be traded continuously. In both cases, adjustments to reported returns are necessary to achieve a degree of comparability. This study makes such adjustments, using sales data from properties that help comprise the National Council of Real Estate Investment Fiduciaries / Frank Russell Company (NCREIF/FRC) Index to generate a "transaction-driven" commercial real estate return series. Examination of the risk-return characteristics of this series shows that it is quite different from traditionally reported real estate return series and far more consistent with risk-return characteristics that have been reported for other asset classes.     

An investigation into blood donation intentions among non‐donors

• In broad terms, the donation of blood along with organ and bone marrow donation is considered to be the ultimate act of humanity involving a voluntary and anonymous exchange between two people of a life saving commodity. Yet motivating people to donate blood is a significantly difficult task. The aim of this paper is to use the Theory of Planned Behaviour (TPB) to examine non‐donors on the basis of their likely intention to donate blood in the future and to identify barriers on these more favourable non‐donors. This exploratory research finds that subjective norm, perceived behavioural control and time related barriers are related to intent to donate by current non‐donors. Differences between higher and lower intention donors are also explored.

Copyright © 2007 John Wiley & Sons, Ltd.     

Product-market strategy and underwriting performance in the United Kingdom’s property–casualty insurance market

Drawing on a framework from the organizational economics literature, we utilize a panel data design to examine empirically the effect of motor insurance and liability insurance business on the overall underwriting performance of insurers operating in the United Kingdom’s (UK) property–casualty insurance market. We find that participation in liability insurance contributes positively to underwriting performance, whereas motor insurance is associated with inferior underwriting performance. Additionally, we find that higher reinsurance ratio is associated with better underwriting performance, but reduced profit margins. Our results show that higher leverage too is associated with better underwriting performance. We conclude that our results could have potentially important commercial and/or policy implications.     

Examining the ‘black box’ of human resource management in MNEs in China: exploring country of origin effects

We examine the impact of HPWS on the attitudes and retention of Chinese employees in multinational enterprises (MNEs) operating in China. More specifically, we examine the extent to which the degree of HPWS and the impact of these practices differ according to the country of origin of the MNE. We surveyed a sample of 410 Chinese employees currently working in Western and Asian MNEs. The findings indicate significant ‘country of origin’ effects, where employees of Western and Asian MNEs perceive different levels of HPWS are in operation in their respective organisations. Employee trust, job satisfaction and affective commitment are all important factors in the retention of Chinese employees of MNEs, with high levels of commitment being the most significant factor. However, the relative impact of these factors on employee retention differs by country of origin of the MNE.     

Theories of the (state-owned) firm

State-owned enterprises (SOEs) contribute approximately 10% of the world’s GDP. SOEs at one time were predicted to disappear from the economic landscape of the world, but today SOEs are growing more prevalent in the world economy. The current theories of the firm that form the pillars of the management discipline largely ignore the theoretical differences that SOEs introduce into the conceptualization of the firm. Therefore, we extend four core theories of the firm by incorporating SOEs as a mainstream (not special or marginal) organizational form into these theories. We focus specifically on property rights theory, transaction cost theory, agency theory, and resource-based theory, culminating in a research agenda with 12 testable propositions.     

Education for leisure: a suggested approach for schools

This paper examines the notion of education for leisure in schools. The present move towards a liberalization of school curricula affords an opportunity for leisure education to occupy a significant role in schools. Although evidence is sparse, it would seem that most schools spurn this opportunity and simply offer pupils simulated ‘taster’ experiences. Thus, it is argued that schools might focus more upon ‘education’ with regard to leisure and a framework is suggested within which such an education could take place.