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Risk management and the cost of equity: evidence from the United Kingdom’s non-life insurance market

Vineet Upreti Orcid Logo, Mike Adams, Joy Jia

The European Journal of Finance, Volume: 28, Issue: 6, Pages: 551 - 570

Swansea University Authors: Vineet Upreti Orcid Logo, Joy Jia

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DOI (Published version): 10.1080/1351847x.2021.1936588

Abstract

We investigate the effect of risk management (reinsurance) on the corporate cost of equity using panel data drawn from the United Kingdom’s (UK) non-life insurance industry. Our results show that use of reinsurance lowers the cost of equity but that the relation is non-linear. We find that the rate...

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Published in: The European Journal of Finance
ISSN: 1351-847X 1466-4364
Published: Informa UK Limited 2021
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URI: https://cronfa.swan.ac.uk/Record/cronfa56953
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first_indexed 2021-05-24T13:30:19Z
last_indexed 2023-01-11T14:36:32Z
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spelling 2022-07-21T16:54:37.7890862 v2 56953 2021-05-24 Risk management and the cost of equity: evidence from the United Kingdom’s non-life insurance market 8f0fcae811cfbfabf93901185944c055 0000-0002-9803-7551 Vineet Upreti Vineet Upreti true false 2d215b93ea1160b2f73dbeb4df908564 Joy Jia Joy Jia true false 2021-05-24 BAF We investigate the effect of risk management (reinsurance) on the corporate cost of equity using panel data drawn from the United Kingdom’s (UK) non-life insurance industry. Our results show that use of reinsurance lowers the cost of equity but that the relation is non-linear. We find that the rate of reduction declines as the level of premiums ceded relative to total gross premiums written increases. We also find that the reinsurance-cost of equity relation is moderated by the risk of financial distress/bankruptcy. This moderating relation is robust to the use of three alternative measures of financial distress and bankruptcy risk. Journal Article The European Journal of Finance 28 6 551 570 Informa UK Limited 1351-847X 1466-4364 Risk management; cost of equity; reinsurance; insurance; bankruptcy; UK 8 6 2021 2021-06-08 10.1080/1351847x.2021.1936588 COLLEGE NANME Accounting and Finance COLLEGE CODE BAF Swansea University 2022-07-21T16:54:37.7890862 2021-05-24T14:19:28.8085214 Faculty of Humanities and Social Sciences School of Management - Accounting and Finance Vineet Upreti 0000-0002-9803-7551 1 Mike Adams 2 Joy Jia 3 56953__20104__ec7e390d1e1a4137ac7562d2dc96e1a6.pdf 56953.pdf 2021-06-09T14:36:32.8212676 Output 1896882 application/pdf Version of Record true © 2021 The Author(s). This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives License true eng http://creativecommons.org/licenses/by-nc-nd/4.0/
title Risk management and the cost of equity: evidence from the United Kingdom’s non-life insurance market
spellingShingle Risk management and the cost of equity: evidence from the United Kingdom’s non-life insurance market
Vineet Upreti
Joy Jia
title_short Risk management and the cost of equity: evidence from the United Kingdom’s non-life insurance market
title_full Risk management and the cost of equity: evidence from the United Kingdom’s non-life insurance market
title_fullStr Risk management and the cost of equity: evidence from the United Kingdom’s non-life insurance market
title_full_unstemmed Risk management and the cost of equity: evidence from the United Kingdom’s non-life insurance market
title_sort Risk management and the cost of equity: evidence from the United Kingdom’s non-life insurance market
author_id_str_mv 8f0fcae811cfbfabf93901185944c055
2d215b93ea1160b2f73dbeb4df908564
author_id_fullname_str_mv 8f0fcae811cfbfabf93901185944c055_***_Vineet Upreti
2d215b93ea1160b2f73dbeb4df908564_***_Joy Jia
author Vineet Upreti
Joy Jia
author2 Vineet Upreti
Mike Adams
Joy Jia
format Journal article
container_title The European Journal of Finance
container_volume 28
container_issue 6
container_start_page 551
publishDate 2021
institution Swansea University
issn 1351-847X
1466-4364
doi_str_mv 10.1080/1351847x.2021.1936588
publisher Informa UK Limited
college_str Faculty of Humanities and Social Sciences
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hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management - Accounting and Finance{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Accounting and Finance
document_store_str 1
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description We investigate the effect of risk management (reinsurance) on the corporate cost of equity using panel data drawn from the United Kingdom’s (UK) non-life insurance industry. Our results show that use of reinsurance lowers the cost of equity but that the relation is non-linear. We find that the rate of reduction declines as the level of premiums ceded relative to total gross premiums written increases. We also find that the reinsurance-cost of equity relation is moderated by the risk of financial distress/bankruptcy. This moderating relation is robust to the use of three alternative measures of financial distress and bankruptcy risk.
published_date 2021-06-08T04:12:18Z
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score 11.037166

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