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The Demise of the Mutual Organizational Form: An Investigation of the Life Insurance Industry

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  • OTGONTSETSEG ERHEMJAMTS
  • J. TYLER LEVERTY
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    Abstract

    We investigate the role of organizational structure in financial services markets by examining the U.S. life insurance industry. Traditionally, stock and mutual life insurers were equally represented, but now the industry is mainly composed of stock firms. We find operational efficiency, access to capital, and tax savings are important determinants for this shift. The incentive to demutualize differs by the type of conversion: full demutualization is chosen for efficiency and access to capital reasons and partial conversion, using a mutual holding company, is chosen for tax savings. Firm operational efficiency improves after conversion. We also find the efficiency of the stock organizational form dominates that of the mutual structure during our sample period, 1995 to 2004. Copyright (c) 2010 The Ohio State University.

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    Bibliographic Info

    Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

    Volume (Year): 42 (2010)
    Issue (Month): 6 (09)
    Pages: 1011-1036

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    Handle: RePEc:mcb:jmoncb:v:42:y:2010:i:6:p:1011-1036

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    Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879

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    Cited by:
    1. J.A. Bikker, 2012. "Performance of the life insurance industry under pressure: efficiency, competition and consolidation," Working Papers 12-19, Utrecht School of Economics.
    2. Kaustia, Markku & Knüpfer, Samuli & Torstila, Sami, 2013. "Stock ownership and political behavior: Evidence from demutualization," SAFE Working Paper Series 2, Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.
    3. Biener, Christian & Eling, Martin, 2012. "Organization and efficiency in the international insurance industry: A cross-frontier analysis," European Journal of Operational Research, Elsevier, vol. 221(2), pages 454-468.
    4. Fabrice Roth, 2012. "Crise et régulation des marchés financiers : Quel impact sur les formes mutuelles dans l'assurance ?," Working Papers halshs-00692342, HAL.
    5. Alfred A. Haug & Vincent C. Blackburn, 2013. "Efficiency Aspects of Government Secondary School Finances in New South Wales: Results from a Two-Stage Double-Bootstrap DEA at the School Level," Working Papers 1316, University of Otago, Department of Economics, revised Nov 2013.

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