Information and Insurer Financial Strength Ratings: Do Short Sellers Anticipate Ratings Changes?

Wade, Chip; Liebenberg, André P.; Blau, Benjamin M.

doi:10.1111/jori.12063

Cited by 6 publications

(7 citation statements)

References 50 publications

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“…In the case of bond rating changes, stock prices move in the direction of the change (positive or negative) during the 12 months prior to the announcement (Holthausen and Leftwich, ; Goh and Ederington, ). Likewise, Wade, Liebenberg, and Blau () find that short‐selling activity is significantly higher prior to insurer rating downgrades. For bond rating downgrades, abnormal negative returns are also apparent in the days following the announcement (Holthausen and Leftwich, ; Hand, Holthausen, and Leftwich, ; Goh and Ederington, ) and can persist for up to a year (Dichev and Piotroski, ).…”

Section: Hypothesesmentioning

confidence: 91%

An Investigation of the Short‐Run and Long‐Run Stock Returns Surrounding Insurer Rating Changes

Chen¹,

Gaver²,

Pottier³

2016

J of Risk & Insurance

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We find that stock returns move in the direction of insurer rating changes in the 12-month period prior to the announcement. There is an additional stock price response following the announcement of a downgrade, but no response to upgrade announcements. The reaction to a downgrade is more pronounced when it involves a smaller insurer, when it spans multiple levels, or when it is a threshold downgrade. Returns are significantly more negative during the 12 months leading up to a downgrade announcement during the financial crisis (2008 and 2009) compared to other sample years.

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Section: Hypothesesmentioning

confidence: 91%

An Investigation of the Short‐Run and Long‐Run Stock Returns Surrounding Insurer Rating Changes

Chen¹,

Gaver²,

Pottier³

2016

J of Risk & Insurance

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“…Hence, we expect the effect of a drop in analyst coverage to be stronger for more opaque insurance firms than for less opaque insurance firms. We use the variation in opaqueness (Wade et al, 2016;Zhang et al, 2009) to test our third hypothesis: Hypothesis 3. For more opaque firms, the effect of a drop in analyst coverage on firm risk-taking should be stronger than for less opaque firms.…”

Section: Hypothesis Developmentmentioning

confidence: 99%

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Analyst coverage, executive compensation and corporate risk‐taking: Evidence from property–casualty insurance firms

Chen

Kamiya

Lou

et al. 2023

J of Risk & Insurance

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Using an exogenous drop in analyst coverage introduced by broker closures and mergers, we test for the causal impact of analyst coverage on corporate risk‐taking, in an opaque industry. We document an increase in risk using several book‐based and market‐based risk measures, including tail and default risk measures. Results are driven by firms with stronger managerial risk‐taking compensation incentives. The increase in risk is stronger in more opaque firms, and firms with weaker policyholder monitoring. Firm risk increases through at least one risk‐taking action, such as investing firm assets in higher‐risk bonds. Our study highlights the importance of stock analysts in affecting corporate risk‐taking, especially in the presence of stronger managerial, compensation risk‐taking incentives.

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“…Based on the research of economists [18][19][20], we can say that in their activities, insurance companies should strive for an optimal combination of the proportion between risk acceptance and capital. To minimize risks, property liability insurance companies resort to reinsurance.…”

Section: The Main Problems Of This Market Includementioning

confidence: 99%

Insurance of Financial Risks of Industrial Enterprises

Olga¹,

Lucia²,

Elena³

2020

Proceedings of the “New Silk Road: Business Cooperation and Prospective of Economic Development” (NSRBCPED 2019)

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The article discusses the theoretical and practical aspects of the development of the market for insurance of financial risks of industrial enterprises. Theoretical studies have revealed that the total insurance protection of industrial enterprises is represented by property insurance, business risk insurance, civil liability insurance and personal insurance. In their research, the authors turned to foreign sources and studied the features of insurance of industrial enterprises abroad. In foreign practice, these areas of insurance have become widespread, but in Russian practice they are never used. However, the authors have identified a narrow list of insured financial risks of industrial enterprises in Russia. In Russia today, only insurance in case of production stoppage has become widespread. The authors attempt to consider one of the poorly developed insurance industries in Russia, as insurance of financial risks of industrial enterprises, to show the problems of this insurance industry and determine ways to solve them. The analysis showed that the leader of the insurance market in terms of collected premiums is property insurance. Premiums for financial risk insurance are increasing due to the growth of bank card insurance. The authors, when studying large and mediumsized businesses, found that large enterprises use business insurance, avoiding gray "salary" schemes and cover a large amount of various risks. However, some companies use "double" accounting in their practice, which makes it difficult for insurers to determine the real level of risk of their business. The small number of insurance companies and the unwillingness of insurers to provide financial risk insurance services for industrial enterprises are the main problems today. The authors propose to adopt standard insurance rules in this area.

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Information and Insurer Financial Strength Ratings: Do Short Sellers Anticipate Ratings Changes?

Cited by 6 publications

References 50 publications

An Investigation of the Short‐Run and Long‐Run Stock Returns Surrounding Insurer Rating Changes

An Investigation of the Short‐Run and Long‐Run Stock Returns Surrounding Insurer Rating Changes

Analyst coverage, executive compensation and corporate risk‐taking: Evidence from property–casualty insurance firms

Insurance of Financial Risks of Industrial Enterprises

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