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 |
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Pages (from-to) | 311-330 |
Number of pages | 20 |
Journal | Journal of Corporate Finance |
Volume | 18 |
Issue number | 2 |
DOIs | |
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