Effects of corporate diversification: Evidence from the property-liability insurance industry

Journal of Risk and Insurance

Volumn 75, Issue 4, 2008, Pages 893-919

  Liebenberg, Andre P ^a   Sommer, David W ^b  

^a UNIVERSITY OF MISSISSIPPI   (United States)

^b ST MARY'S UNIVERSITY   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 55449101152     PISSN: 00224367     EISSN: 15396975     Source Type: Journal    
DOI: 10.1111/j.1539-6975.2008.00290.x     Document Type: Article

References (65)

1. BarNiv, R., and J. Hathorn, 1997, The Merger or Insolvency Alternative in the Insurance Industry, Journal of Risk and Insurance, 64 : 89 113.
2. BarNiv, R., and J. B. McDonald, 1992, Identifying Financial Distress in the Insurance Industry: A Synthesis of Methodological and Empirical Issues, Journal of Risk and Insurance, 59 : 543 574.
3. Belsley, D. A., E. Kuh, and R. E. Welsch, 1980, Regression Diagnostics, Identifying Influential Data and Sources of Collinearity (New York : Wiley).
4. Berger, A. N., J. D. Cummins, M. A. Weiss, and H. Zi, 2000, Conglomeration Versus Strategic Focus: Evidence From the Insurance Industry, Journal of Financial Intermediation, 9 : 323 362.
5. Berger, P. G., and E. Ofek, 1995, Diversification's Effect on Firm Value, Journal of Financial Economics, 37 : 39 65.
6. Bettis, R. A., and W. K. Hall, 1982, Diversification Strategy, Accounting Determined Risk, and Accounting Determined Return, Academy of Management Journal, 25 : 254 264.
7. Browne, M. J., J. M. Carson, and R. E. Hoyt, 1999, Economic and Market Predictors of Insolvencies in the Life-Health Insurance Industry, Journal of Risk and Insurance, 66 : 643 659.
8. Browne, M. J., J. M. Carson, and R. E. Hoyt, 2001, Dynamic Financial Models of Life Insurers, North American Actuarial Journal, 5 : 11 26.
9. Campa, J. M., and S. Kedia, 2002, Explaining the Diversification Discount, Journal of Finance, 57 : 1731 1762.
10. Ceniceros, R., and M. A. Hofmann, 1999, Insurers Rejoice at First Few Signs of Firmer Pricing, Business Insurance, 33 : 3.
11. Chidambaran, N. K., T. A. Pugel, and A. Saunders, 1997, An Investigation of the Performance of the U.S. Property-Liability Insurance Industry, Journal of Risk and Insurance, 64 : 371 381.
12. Chung, K. H. and S. W. Pruitt, 1994, A Simple Approximation of Tobin's Q, Financial Management, 23 : 70 74.
13. Cole, C. R. and K. A. McCullough, 2006, A Reexamination of the Corporate Demand for Reinsurance, Journal of Risk and Insurance, 73 : 169 192.
14. Comment, R., and G. A. Jarrell, 1995, Corporate Focus and Stock Returns, Journal of Financial Economics, 37 : 67 87.
15. Cummins, J. D., and P. M. Danzon, 1997, Price, Financial Quality, and Capital Flows in Insurance Markets, Journal of Financial Intermediation, 6 : 3 38.
16. Cummins, J. D., and G. Nini, 2002, Optimal Capital Utilization by Financial Firms: Evidence From the Property-Liability Insurance Industry, Journal of Financial Services Research, 21 : 15 53.
17. Cummins, J. D., and D. W. Sommer, 1996, Capital and Risk in Property-Liability Insurance Markets, Journal of Banking and Finance, 20 : 1069 1092.
18. Cummins, J. D., M. A. Weiss, and H. Zi, 1999, Organizational Form and Efficiency: The Coexistence of Stock and Mutual Property-Liability Insurers, Management Science, 45 : 1254 1269.
19. Cummins, J. D., M. A. Weiss, and H. Zi, 2003, Economies of Scope in Financial Services: A DEA Bootstrapping Analysis of the US Insurance Industry, Working Paper, Wharton Financial Institutions Center, Philadelphia, PA.
20. Datta, D. K., N. Rajagopalan, and A. M. A. Rasheed, 1991, Diversification and Performance: Critical Review and Future Directions, Journal of Management Studies, 28 : 529 558.
21. Davis, R. and I. M. Duhaime, 1992, Diversification, Vertical Integration, and Industry Analysis: New Perspectives and Measurement, Strategic Management Journal, 13 : 511 524.
22. Denis, D. J., D. K. Denis, and A. Sarin, 1997, Agency Problems, Equity Ownership, and Corporate Diversification, Journal of Finance, 52 : 135 160.
23. Desai, H., and P. C. Jain, 1999, Firm Performance and Focus: Long-Run Stock Market Performance Following Spinoffs, Journal of Financial Economics, 54 : 75 101.
24. Easterbrook, F. H., 1984, Two Agency-Cost Explanations of Dividends, American Economic Review, 74 : 650 659.
25. Goch, L., 2001, Market Hardening, Best's Review, 101 : 32 34.
26. Grace, E., 2004, Contracting Incentives and Compensation for Property-Liability Insurer Executives, Journal of Risk and Insurance, 71 : 285 307.
27. Graham, J. R., M. L. Lemmon, and J. G. Wolf, 2002, Does Corporate Diversification Destroy Value Journal of Finance, 57 : 695 720.
28. Greene, W. H., and D. Segal, 2004, Profitability and Efficiency in the U.S. Life Insurance Industry, Journal of Productivity Analysis, 21 : 229 247.
29. Hamilton, R. T., and G. S. Shergill, 1993, Extent of Diversification and Company Performance: The New Zealand Evidence, Managerial and Decision Economics, 14 : 47 52.
30. Hartwig, R. P., 2004, 2004-Year End Results, Insurance Information Institute, New York. World Wide Web : http://www.iii.org/media/industry/ financials/2004yearend, Accessed April 2, 2007.
31. Hausman, J. A. and W. E. Taylor, 1981, Panel Data and Unobservable Individual Effects, Econometrica, 49 : 1377 1398.
32. Herring, R. J. and A. M. Santomero, 1990, The Corporate Structure of Financial Conglomerates, Journal of Financial Services Research, 4 : 471 497.
33. Hill, C. W. L., M. A. Hitt, and R. E. Hoskisson, 1992, Cooperative Versus Competitive Structures in Related and Unrelated Diversified Firms, Organization Science, 3 : 501 521.
34. Hoyt, R. E., and J. S. Trieschmann, 1991, Risk/Return Relationships for Life-Health, Property-Liability, and Diversified Insurers, Journal of Risk and Insurance, 58 : 322 330.
35. John, K., and E. Ofek, 1995, Asset Sales and Increase in Focus, Journal of Financial Economics, 37 : 105 126.
36. Johnson, G., and H. Thomas, 1987, The Industry Context of Strategy, Structure and Performance: The U.K. Brewing Industry, Strategic Management Journal, 8 : 343 361.
37. King, A. L., 1975, The Market Performance of Diversified and Non-Diversified Organizations within the P-L Insurance Industry, Journal of Risk and Insurance, 42 : 471 493.
38. Klein, R. W., R. D. Phillips, and W. Shiu, 2002, The Capital Structure of Firms Subject to Price Regulation: Evidence From the Insurance Industry, Journal of Financial Services Research, 21 : 79 100.
39. Laeven, L., and R. Levine, 2007, Is There a Diversification Discount in Financial Conglomerates Journal of Financial Economics, 85 : 331 367.
40. Lai, G. C., and P. Limpaphayom, 2003, Organizational Structure and Performance: Evidence From the Nonlife Insurance Industry in Japan, Journal of Risk and Insurance, 70 : 735 758.
41. Lamont, O. A., and C. Polk, 2002, Does Diversification Destroy Value? Evidence From the Industry Shocks, Journal of Financial Economics, 63 : 51 77.
42. Lang, L. H. P., and R. M. Stulz, 1994, Tobin's q, Corporate Diversification, and Firm Performance, Journal of Political Economy, 102 : 1248 1280.
43. Lewellen, W. G., 1971, A Pure Financial Rationale for the Conglomerate Merger, Journal of Finance, 26 : 521 537.
44. Lichtenberg, F. R., 1991, The Managerial Response to Regulation of Financial Reporting for Segments of a Business Enterprise, Journal of Regulatory Economics, 3 : 241 249.
45. Markides, C. C., 1992, Consequences of Corporate Refocusing: Ex Ante Evidence, Academy of Management Journal, 35 : 398 412.
46. Martin, J. D., and A. Sayrak, 2003, Corporate Diversification and Shareholder Value: A Survey of Recent Literature, Journal of Corporate Finance, 9 : 37 57.
47. Mayer, M., and R. Whittington, 2003, Diversification in Context: A Cross National and Cross Temporal Extension, Strategic Management Journal, 24 : 773 781.
48. Mayers, D., and W. S. Cliford, Jr., 1981, Contractual Provisions, Organizational Structure, and Conflict Control in Insurance Markets, Journal of Business, 54 : 407 434.
49. Mayers, D., and C. W. Smith, Jr., 1988, Ownership Structure Across Lines of Property-Casualty Insurance, Journal of Law and Economics, 31 : 351 378.
50. McCullough, K. A., and R. E. Hoyt, 2005, Characteristics of Property-Liability Insurance Acquisition Targets, Journal of Insurance Issues, 28 : 61 87.
51. Meador, J. W., H. E. Ryan, Jr., and C. D. Schellhorn, 2000, Product Focus Versus Diversification: Estimates of X-Efficiency for the US Life Insurance Industry, in : P. T. Harker and S. A. Zenios, eds., Performance of Financial Institutions: Efficiency, Innovation, Regulation (New York : Cambridge University Press).
52. Montgomery, C. A., 1985, Product-Market Diversification and Market Power, Academy of Management Journal, 28 : 789 798.
53. Myers, S. C., and N. S. Majluf, 1984, Corporate Financing and Investment Decisions When Firms Have Information That Investors Do Not Have, Journal of Financial Economics, 13 : 187 221.
54. Petersen, M. A., In press, Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches, Review of Financial Studies.
55. Pottier, S. W., and D. W. Sommer, 1999, Property-Liability Insurer Financial Strength Ratings: Differences Across Rating Agencies, Journal of Risk and Insurance, 66 : 621 642.
56. Ruquet, M. E., 2000, Market Hardening, Survey Says, National Underwriter: Property & Casualty, 104 : 1.
57. SAS Institute, 1999, SAS/STAT User's Guide (Cary, NC : SAS Institute).
58. Servaes, H., 1996, The Value of Diversification During the Conglomerate Merger Wave, Journal of Finance, 51 : 1201 1225.
59. Sommer, D. W., 1996, The Impact of Firm Risk on Property-Liability Insurance Prices, Journal of Risk and Insurance, 63 : 501 514.
60. Teece, D. J., 1980, Economies of Scope and the Scope of the Enterprise, Journal of Economic Behavior and Organization, 1 : 223 247.
61. Tombs, J. W., and R. E. Hoyt, 1994, The Effect of Product Line Focus on Insurer Stock Returns, in : Proceedings of the International Insurance Association Annual Meeting, Madrid, Spain, pp. 331 337.
62. Villalonga, B., 2004a, Diversification Discount or Premium? New Evidence From the Business Information Tracking Series, Journal of Finance, 59 : 475 502.
63. Villalonga, B., 2004b, Does Diversification Cause the "Diversification Discount" Financial Management, 33 : 5 27.
64. Winton, A., 1999, Don't Put All Your Eggs in One Basket? Diversification and Specialization in Lending, Working Paper, University of Minnesota, Minneapolis.
65. Wooldridge, J. M., 2002, Econometric Analysis of Cross Section and Panel Data (Cambridge, MA : MIT Press).