Stock versus mutual ownership structures: the risk implications
Article Abstract:
The risk characteristics of mutual organizations and stock ownership firms are compared. Mutual firms, such as cooperatives, have owners that are also its customers, while stock organizations are characterized by the separation of its owners and customers. Firm-specific measures of risk are constructed for a sample of property-liability insurance firms. A conditional logit model is used to test the existence of a relationship between these measures and the type of firm ownership structure. The results suggest that stock insurers have riskier cash flows than mutual insurers. This remains true despite disaggregation according to line of business and geographic area. In general, stock firms do more business in riskier geographic areas and business fields than do mutual ownership insurers.
Publication Name: The Journal of Business
Subject: Business, general
ISSN: 0021-9398
Year: 1993
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On the relative importance of duration constraints
Article Abstract:
The concept of duration has become a popular analytical and practical tool in the business community. A study is conducted in the context of a more general context to extend previous studies using m duration measures. It reveals an implicit assumption and its implications in the process of maximization of yield or minimization of costs affected by the duration constraints. This technique, which involves linear programming results, is demonstrated to be sensible only if the bond yield is a linear function of its duration measures. An analysis of the relative significance of the duration constraints shows that there is no reason for meeting the first duration constraint instead of prioritizing the satisfaction of a higher order duration constraint.
Publication Name: Management Science
Subject: Business, general
ISSN: 0025-1909
Year: 1997
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Estimation risk and incentive contracts for portfolio managers
Article Abstract:
The fiduciary tie between investors and the portfolio managers who represent them may be seen as an agent-principal relationship. Agency literature methodology in finance and economics is used to study the effect of current compensation arrangements on conflicts of interest between the two groups. The Capital Assets Pricing Model's assumptions are employed, as well as the estimation risk concerning beta. The investor cannot see the manager's action, so this model entails moral risk. Managerial divergent behavior is shown to be related to divergence in risk preferences between the investor and the manager. The investor is shown to prefer a manager who is less risk-averse than the manager.
Publication Name: Management Science
Subject: Business, general
ISSN: 0025-1909
Year: 1988
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