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

Chen LIN, Ping LIN, Hong ZOU

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

9 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 languageEnglish
Pages (from-to)311-330
Number of pages20
JournalJournal of Corporate Finance
Volume18
Issue number2
DOIs
Publication statusPublished - 1 Apr 2012

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Corporate risk management
Property rights
Management strategy
Management decisions
Chinese firms
Law and finance
Business strategy
Investment decision
Property insurance
Cross-country analysis
Financing decisions
Economic growth
Consumption insurance

Keywords

  • Banking
  • Property rights protection
  • Risk Management

Cite this

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title = "Does property rights protection affect corporate risk management strategy? Intra- and cross-country evidence",
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.",
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Does property rights protection affect corporate risk management strategy? Intra- and cross-country evidence. / LIN, Chen; LIN, Ping; ZOU, Hong.

In: Journal of Corporate Finance, Vol. 18, No. 2, 01.04.2012, p. 311-330.

Research output: Journal PublicationsJournal Article (refereed)Researchpeer-review

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