Regulation, Capital, and the Evolution of Organizational Form in US Life Insurance
This paper studies the association between regulation and the organizational form of new life insurers between 1900 and 1949. The mutual form was popular in states with low initial capital requirements for mutual companies and differentially higher requirements for stock companies, but was rarely used elsewhere. This suggests that entrepreneurs took a "path of least resistance" when choosing organizational form and that the mutual's disadvantage in raising capital contributed to its decline–a decline that accelerated as states raised requirements and eliminated the aforementioned differentials. Contrary to previous analysis, the paper finds little evidence connecting other regulations to mutual decline. (JEL G21, L51, N21, N22)
Volume (Year): 97 (2007)
Issue (Month): 3 (June)
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- Damodaran, Aswath & John, Kose & Liu, Crocker H., 1997. "The determinants of organizational form changes: evidence and implications from real estate," Journal of Financial Economics, Elsevier, vol. 45(2), pages 169-192, August.
- Lowry, Michelle, 2003. "Why does IPO volume fluctuate so much?," Journal of Financial Economics, Elsevier, vol. 67(1), pages 3-40, January.
- Choe, Hyuk & Masulis, Ronald W. & Nanda, Vikram, 1993. "Common stock offerings across the business cycle : Theory and evidence," Journal of Empirical Finance, Elsevier, vol. 1(1), pages 3-31, June.
- Gentry, William M., 1994. "Taxes, financial decisions and organizational form : Evidence from publicly traded partnerships," Journal of Public Economics, Elsevier, vol. 53(2), pages 223-244, February.
- Graham, John R. & Harvey, Campbell R., 2005. "The long-run equity risk premium," Finance Research Letters, Elsevier, vol. 2(4), pages 185-194, December.
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