Corporate risk management with reinsurance and derivatives : panel data methodology and new results from empirical studies using Australian data
This thesis contributes to the issue of why corporations manage risk with insuranceand financial derivative contracts. Two different empirical studies are donewith data sets from Australian companies: 1) one study on reinsurance demand;and 2) one study on interest-rate-risk hedging demand from non-banking companieslisted at the Australian Stock Exchange (ASX). Both studies use paneldata models. A Monte Carlo simulation replicates the basic characteristics of theoriginal data sets and allows a performance comparison among different paneldata models. This thesis provides the first empirical work on insurer demand forreinsurance using Australian data. A panel-data set (1996-2001) is used, whichprovides 543 observations. The study finds strong evidence that larger insurers,insurers member of a group of companies, reinsurers, and captive insurersreinsure more. The impacts of leverage, taxes, and return on investments are notstatistically significant. The second empirical study analyses the interest-rate-riskhedging demand with two panel data sets from 1998 to 2003 (1134 and 465 observations,respectively). Detailed information about interest-rate-risk exposures wasavailable after manual data collection from financial reports, which was only possibledue to specific reporting requirements in Australian accounting standards. Aprobit regression analysis confirms previous empirical results that company sizeis important to the decision to hedge interest rate risk in Australia. However,in relation to the analysis of the extent of hedging, the proper measurement ofinterest-rate-risk exposures generates some significant results different from thosefound in previous studies. For example, this study shows that total leverage (totaldebt ratio) is not significantly important to interest-rate-risk hedging demand andthat, instead, this demand is related to the specific risk exposure in the interestbearing part of debt. This study finds significant relations of interest-rate-riskhedging to company size, floating-interest-rate debt ratio, annual log returns, andcompany industry type.
Year of publication: |
2006
|
---|---|
Institutions: | Carneiro, Luiz Augusto Ferreira, Actuarial Studies, Australian School of Business, UNSW |
Publisher: |
Awarded by:University of New South Wales. School of Actuarial Studies |
Subject: | Risk management - Australia | Reinsurance |
Saved in:
freely available
Saved in favorites
Similar items by subject
-
Pension fund efficiency : the impact of scale, governance and plan design
Bikker, Jacob A., (2006)
-
Health care reinsurance and insurance reform in the United States : a simulation model
Bernstein, David S., (2010)
-
The government of reinsurer of catastrophe risks?
Bruggeman, VĂ©ronique, (2010)
- More ...