IDEAS home Printed from https://ideas.repec.org/p/zbw/kondp2/130.html
   My bibliography  Save this paper

Financial distress, incentives and the value of corporate insurance

Author

Listed:
  • Grillet, Luc L.

Abstract

Positive contracting costs (imperfect marketability), the impos-sibility of complete spanning of State spaces and other market imperfections explain the relevance of the corporate buying of property and liability insurance. For a corporation with diffuse ownership, risk aversion is irrelevant, since investors can diversify unsystematic (insurable) risks. Corporate insurance purchasing may enhance the market value of the firm via taxes, regulatory costs, contracting costs or the impact of financial policy on the firm's investment decision. Particularly in the case where financial distress depresses the market value of the firm, insurance hedging appears to be valuable. The magnitude of the insurance benefit is hypothesized to be positively correla-ted with the ratio of the firm's implicit over explicit Claims.

Suggested Citation

  • Grillet, Luc L., 1991. "Financial distress, incentives and the value of corporate insurance," Discussion Papers, Series II 130, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    • Handle: RePEc:zbw:kondp2:130
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/101536/1/769768156.pdf
    Download Restriction: no
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:kondp2:130. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/fwkonde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.