Dividend policy and the global financial crisis: empirical evidence from the Italian insurance industry

Abstract

The financial crisis has led to controversial discussions about the capital base of the insurance industry. Dividend cuts and capital increases have been suggested to counter diminishing equity. However, some observers seem to fear that investors could interpret a reduction of dividends as a sign for future problems. The empirical evidence from the Italian insurance sector reported here does indeed indicate that dividend smoothing is a relevant economic phenomenon. Therefore, Italian insurance companies should rethink dividend policy rather carefully due to the possible negative consequences of dividend cuts.

Dividend signaling or dividend smoothing? New empirical evidence from the italian insurance industry after the global financial crisis

“…Moreover, Basse et al. ( 2011 a) already have examined data from the Italian insurance industry. Their sample period is from Q1 1999 to Q4 2008 and they have also found empirical evidence for dividend smoothing and no support for the dividend signaling hypothesis using multivariate cointegration techniques to test for Granger causality among dividend payouts and corporate earnings.…”

“…Therefore Basse et al. ( 2011 a) have include a measure of the macroeconomic price level in Italy analyzing the dividend policy of insurance companies in this country. Given the data that is shown in Fig.…”

“…One of the more recent papers from this sub-set of the literature has examined data from Italian insurance companies (see Basse et al. 2011 a). Italy has had to face a number of crisis events in recent years (see, for instance Basse et al.…”

Optimal Dividend and reinsurance strategy of a Property Insurance Company under Catastrophe Risk

“…Optimizing dividend payments is a classical problem starting from the early work of Borch [6,7], Gerber [10]. For some applications of control theory in insurance mathematics, see Højgaard and Taksar [16,18], Martin-löf [20], Asmussen and Taksar [4,9] and He and Liang [13,14,15], Basse, Reddemann, Riegler and Schulenburg [8], Guo, Liu and Zhou [11] and other author's work. Recent surveys can be found in Taksar [23], Avanzi [3], Albrecher and Thonhauser [1].…”