Does property rights protection affect corporate risk management strategy? Intra- and cross-country evidence

Chen LIN; Ping LIN; Hong ZOU

doi:10.1016/j.jcorpfin.2011.12.006

Does property rights protection affect corporate risk management strategy? Intra- and cross-country evidence

Chen LIN, Ping LIN, Hong ZOU

Department of Economics

Research output: Journal Publications › Journal Article (refereed) › peer-review

20 Citations (Scopus)

Abstract

Recent studies in the law and finance literature have shown that property rights protection is central to corporate financing and investment decisions and economic growth at large. We extend this literature by examining the effect of property rights security on corporate risk management decisions - an important element of a firm’s business strategy. Using a unique dataset covering over 55,000 Chinese firms and employing both institution- and firm-level measures of property rights security, we find that secure property rights lead to higher corporate demand for property insurance, suggesting that property rights security is an important determinant of corporate risk management decisions. The effect of property rights protection on insurance consumption is also validated by a cross-country analysis that uses data from 93 countries over the period 1995-2008. Our study represents an initial attempt towards understanding the importance of property rights protection to corporate risk management decisions.

Original language	English
Pages (from-to)	311-330
Number of pages	20
Journal	Journal of Corporate Finance
Volume	18
Issue number	2
DOIs	https://doi.org/10.1016/j.jcorpfin.2011.12.006
Publication status	Published - 1 Apr 2012

Bibliographical note

Authors listed alphabetically. We thank Jeffry Netter (the editor) and an anonymous reviewer for very constructive comments. We also thank Mike Adams, Steve Diacon, Arthur Hau, Stan Hoi, Jiahui Lu, Damian Ward, Jason Xiao, Tong Yu, Steve Young, Rongli Yuan and participants at the seminar held at City University of Hong Kong and Southwestern University of Finance and Economics, and the All China Economics International Conference for helpful suggestions on the paper.

Funding

Chen Lin and Ping Lin acknowledge the financial support from Chinese University of Hong Kong and financial support from Lingnan University (Grants DR05A2 and DR07B2 , respectively). Zou acknowledges the financial support of City University of Hong Kong. Research assistance of Wanbin Pan and Leo Zhang is appreciated.

Keywords

Banking
Property rights protection
Risk Management

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

Access to Document

10.1016/j.jcorpfin.2011.12.006

Cite this

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abstract = "Recent studies in the law and finance literature have shown that property rights protection is central to corporate financing and investment decisions and economic growth at large. We extend this literature by examining the effect of property rights security on corporate risk management decisions - an important element of a firm{\textquoteright}s business strategy. Using a unique dataset covering over 55,000 Chinese firms and employing both institution- and firm-level measures of property rights security, we find that secure property rights lead to higher corporate demand for property insurance, suggesting that property rights security is an important determinant of corporate risk management decisions. The effect of property rights protection on insurance consumption is also validated by a cross-country analysis that uses data from 93 countries over the period 1995-2008. Our study represents an initial attempt towards understanding the importance of property rights protection to corporate risk management decisions.",

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AB - Recent studies in the law and finance literature have shown that property rights protection is central to corporate financing and investment decisions and economic growth at large. We extend this literature by examining the effect of property rights security on corporate risk management decisions - an important element of a firm’s business strategy. Using a unique dataset covering over 55,000 Chinese firms and employing both institution- and firm-level measures of property rights security, we find that secure property rights lead to higher corporate demand for property insurance, suggesting that property rights security is an important determinant of corporate risk management decisions. The effect of property rights protection on insurance consumption is also validated by a cross-country analysis that uses data from 93 countries over the period 1995-2008. Our study represents an initial attempt towards understanding the importance of property rights protection to corporate risk management decisions.

KW - Banking

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KW - Risk Management

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M3 - Journal Article (refereed)

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JF - Journal of Corporate Finance

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Does property rights protection affect corporate risk management strategy? Intra- and cross-country evidence

Abstract

Bibliographical note

Funding

Keywords

UN SDGs

Access to Document

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