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Quantile Regression Analysis of Corporate Liquidity: Evidence from the U.S. Property–Liability Insurance Industry

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  • Vincent Y Chang

    (Department of Insurance, Chaoyang University of Technology, 168, Jifong E. Road, Wufong District, Taichung, Taiwan 41349, R.O.C. Email: vcchang@cyut.edu.tw)

  • Jeffrey Tzuhao Tsai

    (Department of Quantitative Finance, National Tsing Hua University, No. 101, Section 2, Kuang-Fu Road, Hsinchu, Taiwan 30013, R.O.C. Email: thtsai@mx.nthu.edu.tw)

Abstract

This study analyses the determinants of corporate liquidity for the U.S. property–liability insurance industry from 2006 to 2010. Unlike previous studies using the ordinary least squares (OLS) approach, this study applies the quantile regression (QR) method. The QR method provides further insights on how insurers’ liquidity level is determined, especially for the firms at the lower and the higher quantiles. We found that leverage and organisational structure have opposite effects on insurers’ liquidity in the lower and the higher quantile groups. The empirical results also show that most firm-specific characteristics and macroeconomic conditions influence the insurers’ liquidity, which are consistent with the findings of the OLS approach in previous studies.

Suggested Citation

  • Vincent Y Chang & Jeffrey Tzuhao Tsai, 2014. "Quantile Regression Analysis of Corporate Liquidity: Evidence from the U.S. Property–Liability Insurance Industry," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 39(1), pages 77-89, January.
    • Handle: RePEc:pal:gpprii:v:39:y:2014:i:1:p:77-89
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    Cited by:

    1. Hung, Jessica & Chang, Vincent Y. L., 2018. "The analysis of capital structure for propertyliability insurers: A quantile regression approach," Business and Economic Horizons (BEH), Prague Development Center, vol. 14(4), pages 829-850, August.
    2. Martin Eling & Ruo Jia, 2017. "Recent Research Developments Affecting Nonlife Insurance—The CAS Risk Premium Project 2014 Update," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 20(1), pages 63-77, March.
    3. Sana Sheikh & Ali Murad Syed & Syed Sikander Ali Shah, 2018. "Corporate Reinsurance Utilisation and Capital Structure: Evidence from Pakistan Insurance Industry," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 43(2), pages 300-334, April.

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