This article extends the theory of corporate risk management to encompass highly dynamic risks. Taking Viscusi's (1989) prospective reference from the context of individual decision making and applying it to a corporate context we propose a theory of how corporations process new information. Using unique data on all terrorism insurance policies sold in Germany we find support for this concept of risk-updating by showing that the demand for terrorism insurance is strongly determined by the recent occurrence of terrorist attacks.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
7221.
Find related papers by JEL classification: D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Capital and Ownership Structure
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