Dividend decisions in the property and liability insurance industry: mutual versus stock companies

Dividend decisions in the property and liability insurance industry: mutual versus stock companies 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

Dividend decisions in the property and liability insurance industry: mutual versus stock companies

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Publisher
Springer US
Copyright
Copyright © 2008 by Springer Science+Business Media, LLC
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1007/s11156-008-0102-y
Publisher site
See Article on Publisher Site

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.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Nov 11, 2008

References

  • On the existence of an optimal capital structure: theory and evidence
    Bradley, M; Jarrell, JA; Kim, EH
  • Capitalization of the property-liability insurance industry: overview
    Cummins, JD; Doherty, NA
  • Optimal capital utilization by financial firms: evidence from the property-liability insurance industry
    Cummins, JD; Nini, GP
  • Risk management: coordinating corporate investment and financing policies
    Froot, KA; Scharfstein, DS; Stein, JC

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