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The impact of regulator's statement requesting EU insurers to suspend dividend distributions due to the COVID-19 pandemic on share prices

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  • Enja Erker

    (University of Ljubljana, Faculty of Mathematics and Physics, Ljubljana, Slovenia)

Abstract

This article examines the impact of the regulator’s statement requesting EU insurers to suspend dividend distributions due to the COVID-19 pandemic on share prices of insurance companies. The purpose of the regulation was to maintain a high level of capitalisation of insurance companies, thus allowing them to pay compensation for any damage incurred during the crisis. The statistical significance of the potential negative impact was explored using event study methodology. The empirical results suggest that the negative impact following the statement’s release is not statistically significant over the chosen event window. The robustness of the results is confirmed by several statistical tests - parametric and nonparametric. The measure did not result in a fall in share prices in line with economic theory but, rather, contributed to ensuring the financial stability of the European insurance sector, supporting the real economy and consequently allowing quicker economic recovery.

Suggested Citation

  • Enja Erker, 2022. "The impact of regulator's statement requesting EU insurers to suspend dividend distributions due to the COVID-19 pandemic on share prices," Public Sector Economics, Institute of Public Finance, vol. 46(1), pages 83-107.
    • Handle: RePEc:ipf:psejou:v:46:y:2022:i:1:p:83-107
    DOI: 10.3326/pse.46.1.3
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    References listed on IDEAS

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    More about this item

    Keywords

    COVID-19; regulator’s statement; insurance companies; event study; share prices;
    All these keywords.

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • P43 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Finance; Public Finance
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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