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Corporate Insurance and Debt: The Case of China

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  • Hong Zou
  • Mike B. Adams

Abstract

Finance theorists have long argued that corporate purchases of property insurance can reduce the probability and hence the expected costs of financial distress. And by so doing, the corporate use of insurance can reduce borrowing costs and/ or increase debt capacity, reduce the overall cost of capital, and increase firm value. This article attempts to apply this argument to the case of publicly traded companies in China, which provides a particularly interesting environment given the significant presence of both foreign direct investment and state shareholdings in its corporate sector. Copyright Copyright (c) 2009 Morgan Stanley.

Suggested Citation

  • Hong Zou & Mike B. Adams, 2009. "Corporate Insurance and Debt: The Case of China," Journal of Applied Corporate Finance, Morgan Stanley, vol. 21(1), pages 87-89.
  • Handle: RePEc:bla:jacrfn:v:21:y:2009:i:1:p:87-89
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