Dissertation
Essays on national culture and risk-taking behaviors in the insurance industry
Doctor of Philosophy (PhD), Washington State University
12/2019
Handle:
https://hdl.handle.net/2376/17907
Abstract
This dissertation consists of two essays that study the effects of national culture on corporate risk-taking behaviors in the insurance industry. In recent years, there has been an increasing interest in using national culture to explain corporate decisions. My first essay investigates how dimensions of national culture affect corporate risk-taking behaviors in the insurance industry. The risk-taking measures include total risk, underwriting risk, investment risk, and leverage risk. Using a broad sample of insurance companies from G7 countries over the period 2006-2015, I find that companies in countries with high individualism, masculinity, and indulgence culture dimensions are more risk-taking, whereas companies in countries with high uncertainty avoidance, power distance, and long-term orientation exhibit less risk-taking behaviors. My findings are robust to endogeneity, various alternative measures of cultural framework and risk profile. These cultural effects are significantly moderated by certain firm characteristics including firm size. A further comparison of emerging markets and advanced markets with data from 84 countries show that corporate risk-taking behaviors are affected by cultural dimensions across all markets, while emerging markets are even more so affected. In the second essay, I investigate how dimensions of national culture affect reinsurance demand in the insurance industry. Reinsurance has long been used as a hedging tool by insurance companies to mitigate risk. I find that companies in countries with high individualism, masculinity, and indulgence culture dimensions purchase less reinsurance, whereas companies in countries with high uncertainty avoidance, power distance, and long-term orientation demand more reinsurance. The findings are consistent with the view of prior literature that insurance companies use reinsurance purchase as a tool of hedging. The evidence provides some explanations for cross-country variation in corporate risk-taking behaviors in the insurance industry.
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Details
- Title
- Essays on national culture and risk-taking behaviors in the insurance industry
- Creators
- YIJUN HE - Washington State University, Department of Finance and Management Science
- Contributors
- Gene C Lai (Advisor) - Washington State University, Department of Finance and Management Science
- Awarding Institution
- Washington State University
- Academic Unit
- Carson College of Business
- Theses and Dissertations
- Doctor of Philosophy (PhD), Washington State University
- Identifiers
- 99900889833101842
- Language
- English
- Resource Type
- Dissertation