Premium
DOES BOARD INDEPENDENCE MATTER FOR CORPORATE INSURANCE HEDGING?
Author(s) -
Zou Hong,
Adams Mike,
Xiao Jason Zezhong
Publication year - 2012
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.2012.01324.x
Subject(s) - shareholder , independence (probability theory) , business , actuarial science , property insurance , asset (computer security) , property (philosophy) , risk aversion (psychology) , insurance policy , general insurance , economics , financial economics , finance , expected utility hypothesis , corporate governance , philosophy , statistics , mathematics , computer security , epistemology , computer science
We test the effect of board independence on corporate purchases of property insurance. We find that board independence increases the incidence of property insurance use but does not have a significant effect on the extent of property insurance use given that a firm decides to insure its assets. These findings are consistent with the argument that: (1) more independent boards view it necessary to have property insurance to manage asset‐loss risks and (2) excessive insurance or insurance purchases induced by managerial risk aversion and/or self‐interest does not benefit shareholders and so may not be supported by independent boards.