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Separation of Ownership and Management: Implications for Risk‐Taking Behavior
Author(s) -
Cole Cassandra R.,
He Enya,
McCullough Kathleen A.,
Sommer David W.
Publication year - 2011
Publication title -
risk management and insurance review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.386
H-Index - 16
eISSN - 1540-6296
pISSN - 1098-1616
DOI - 10.1111/j.1540-6296.2010.01192.x
Subject(s) - business , risk management , separation (statistics) , liability , sample (material) , variety (cybernetics) , actuarial science , property (philosophy) , common ownership , econometrics , accounting , economics , finance , computer science , market economy , philosophy , chemistry , chromatography , epistemology , machine learning , artificial intelligence
Issues associated with the relation between the separation of ownership and management and risk‐taking behavior have been considered in an array of studies, with varying results. Due to the wide variety of ownership structures present, the property–casualty insurance industry provides an excellent setting to test the conflicting hypotheses related to separation of ownership from management and risk taking behavior. Employing a large sample of property–liability insurance companies over the period of 1996–2004, we empirically test the alternative hypotheses regarding the implications of separation of ownership from management for firms’ risk taking behavior. The empirical tests include the ownership structures specified in prior research as well as a more detailed classification scheme. We find that each ownership structure is significantly different from every other ownership structure in terms of risk.