Strauss, Jason (2007): Price Regulation, Market Exit, and Financial Leverage of Canadian Property-Liability Insurers.
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This paper investigates strategic brinksmanship between regulated property-liability insurance firms and their regulators. Prior research suggests that firms increase their financial leverage, and thus their probability of bankruptcy and expected bankruptcy costs, in order to mitigate the severity of binding price ceilings. Although financial leverage can be altered by changing capital structure, it can also be altered by increasing other liabilities, as analyzed in this paper. This paper uses an instrumental variable for price regulation with a maximum-likelihood Heckman estimation method over panel data for Canadian property-liability insurers to extract the impact that price regulation has on the financial leverage of insurers as well as the probability of bankruptcy, the non-selection probability.
|Item Type:||MPRA Paper|
|Original Title:||Price Regulation, Market Exit, and Financial Leverage of Canadian Property-Liability Insurers|
|Keywords:||Price Regulation, Insurance, Financial Leverage, Capital Structure, Bankruptcy|
|Subjects:||G - Financial Economics > G2 - Financial Institutions and Services > G22 - Insurance; Insurance Companies
G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
G - Financial Economics > G3 - Corporate Finance and Governance > G33 - Bankruptcy; Liquidation
|Depositing User:||Jason Strauss|
|Date Deposited:||04. Nov 2008 00:03|
|Last Modified:||13. Feb 2013 23:21|
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