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A Reexamination of the Relationship between Organizational Forms and Distribution Channels in the U.S. Property Liability Insurance Industry

Listed author(s):
  • Chang Vincent Y.

    (Chaoyang University of Technology)

  • Wang Jennifer L.

    (National Cheng-Chi University)

  • Tzeng Larry Y.

    (National Taiwan University)

Registered author(s):

    How do property liability insurance companies choose their organizational forms and distribution channels? Prior studies have not yet provided a consistent conclusion. In this paper, we propose a reduced form approach to reexamine the relationship between organizational forms and distribution channels in the insurance industry, using cross-sectional data pertaining to U.S. property liability insurance companies in 2004. We adopt a conditional dependence test, which can overcome the sensitivity problem of the structural form setting. The results show that after we control for all explanatory variables, the relationship between organizational forms and distribution channels is conditionally uncorrelated. The result is consistent with Regan and Tzeng (1999), but contradicts the findings of Baranoff and Sager (2003) and Kim et al. (1996).

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    File URL: https://www.degruyter.com/view/j/apjri.2010.4.2/apjri.2010.4.2.1074/apjri.2010.4.2.1074.xml?format=INT
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    Article provided by De Gruyter in its journal Asia-Pacific Journal of Risk and Insurance.

    Volume (Year): 4 (2010)
    Issue (Month): 2 (July)
    Pages: 1-26

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    Handle: RePEc:bpj:apjrin:v:4:y:2010:i:2:n:1
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    1. Regan, Laureen & Tennyson, Sharon, 1996. "Agent Discretion and the Choice of Insurance Marketing System," Journal of Law and Economics, University of Chicago Press, vol. 39(2), pages 637-666, October.
    2. Marvel, Howard P, 1982. "Exclusive Dealing," Journal of Law and Economics, University of Chicago Press, vol. 25(1), pages 1-25, April.
    3. Pierre-Andre Chiappori & Bernard Salanie, 2000. "Testing for Asymmetric Information in Insurance Markets," Journal of Political Economy, University of Chicago Press, vol. 108(1), pages 56-78, February.
    4. Seog S. Hun, 2005. "Distribution Systems and Operating Leverage," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 1(1), pages 1-18, June.
    5. Berger, Allen N & Cummins, J David & Weiss, Mary A, 1997. "The Coexistence of Multiple Distribution Systems for Financial Services: The Case of Property-Liability Insurance," The Journal of Business, University of Chicago Press, vol. 70(4), pages 515-546, October.
    6. YiLin Wu & Lee Cheng-Few, 2008. "Specification analysis of corporate equity financing decision: a conditional residual approach," Review of Quantitative Finance and Accounting, Springer, vol. 31(4), pages 395-423, November.
    7. Laureen Regan, 1999. "Expense Ratios Across Insurance Distribution Systems: An Analysis By Line Of Business," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 2(2), pages 44-59, 01.
    8. Lucinda Trigo-Gamarra, 2008. "Reasons for the Coexistence of Different Distribution Channels: An Empirical Test for the German Insurance Market," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 33(3), pages 389-407, July.
    9. Mayers, David & Smith, Clifford W, Jr, 1990. "On the Corporate Demand for Insurance: Evidence from the Reinsurance Market," The Journal of Business, University of Chicago Press, vol. 63(1), pages 19-40, January.
    10. Patrick L. Brockett & William W. Cooper & Linda L. Golden & John J. Rousseau & Yuying Wang, 2005. "Financial Intermediary Versus Production Approach to Efficiency of Marketing Distribution Systems and Organizational Structure of Insurance Companies," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 72(3), pages 393-412.
    11. Brockett, Patrick L. & Cooper, William W. & Golden, Linda L. & Rousseau, John J. & Wang, Yuying, 2004. "Evaluating solvency versus efficiency performance and different forms of organization and marketing in US property--liability insurance companies," European Journal of Operational Research, Elsevier, vol. 154(2), pages 492-514, April.
    12. Sass, Tim R & Gisser, Micha, 1989. "Agency Cost, Firm Size, and Exclusive Dealing," Journal of Law and Economics, University of Chicago Press, vol. 32(2), pages 381-400, October.
    13. Ari Hyytinen & Mika Pajarinen, 2005. "External Finance, Firm Growth and the Benefits of Information Disclosure: Evidence from Finland," European Journal of Law and Economics, Springer, vol. 19(1), pages 69-93, January.
    14. Etti Baranoff & Thomas Sager, 2003. "The Relations among Organizational and Distribution Forms and Capital and Asset Risk Structures in the Life Insurance Industry," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 70(3), pages 375-400.
    15. J. David Cummins & Jack VanDerhei, 1979. "A Note on the Relative Efficiency of Property-Liability Insurance Distribution Systems," Bell Journal of Economics, The RAND Corporation, vol. 10(2), pages 709-719, Autumn.
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