Insurance profits exhibit cyclical behavior that has been attributed to capital market constraints. We show that changes in interest rates simultaneously affect the insurer's capital structure and the equilibrium underwriting profit. Depending upon asset and liability maturity structure, capital...

This paper presents an analytical model of underwriting capacity and insurance market equilibrium under an asymmetric corporate tax schedule. It is shown that reinsurance markets enable risk-neutral insurers to allocate tax shields to those firms that have the greatest capacity for utilizing...

Do entrepreneurs have optimism in subsistence economies, and if so, how does it influence entrepreneurial outcomes? We investigate this question by taking the situated view of optimism. We reason that variations in optimism are a function of the type of opportunity pursued and the diversity of...

This article examines the relationship between risk, return, skewness, and utility-based preferences. Examples are constructed showing that, for any commonly used utility function, it is possible to have two continuous unimodal random variables X and Y with positive and equal means, X having a...

This article complements the earlier work by Mayers and Smith (1987) and Schnabel and Roumi (1989) which showed that a property insurance contract could be used to bond subsequent corporate investment decisions. Although these models suggest one possible approach to solving the underinvestment...