Principal-principal-agency relationships and the role of external governance
This paper explores agency problems associated with mutual and joint stock organizational forms. It examines whether the independent mode of distribution acts as a governance factor that reduces principal-agent and principal-principal costs. By analyzing a 1990-1997 panel of life insurance companies this paper provides evidence that mutuals have higher principal-agent costs, but lower principal-principal costs, compared with stocks. Independent distribution mitigates both agency problems by reducing managerial expenses while safeguarding interests of policyholders. These relationships are positively moderated by product complexity and free cash flow. This is consistent with the assumption that companies that use independent agents exhibit lower levels of manager and shareholder opportunism. Copyright © 2009 John Wiley & Sons, Ltd.
Volume (Year): 31 (2010)
Issue (Month): 4 ()
|Contact details of provider:|| Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Loretta J. Mester, 1989.
"Testing for Expense Preference Behavior: Mutual versus Stock Savings and Loans,"
RAND Journal of Economics,
The RAND Corporation, vol. 20(4), pages 483-498, Winter.
- Loretta J. Mester, 1989. "Testing for expense preference behavior: mutual versus stock savings and loans," Working Papers 89-27, Federal Reserve Bank of Philadelphia.
- Galai, Dan & Masulis, Ronald W., 1976. "The option pricing model and the risk factor of stock," Journal of Financial Economics, Elsevier, vol. 3(1-2), pages 53-81.
- Williamson, Oliver E, 1988. " Corporate Finance and Corporate Governance," Journal of Finance, American Finance Association, vol. 43(3), pages 567-591, July.
- Grossman, Sanford J. & Hart, Oliver D., 1988.
"One share-one vote and the market for corporate control,"
Journal of Financial Economics,
Elsevier, vol. 20(1-2), pages 175-202, January.
- Sanford J. Grossman & Oliver D. Hart, 1987. "One Share/One Vote and The Market for Corporate Control," Working papers 440, Massachusetts Institute of Technology (MIT), Department of Economics.
- Sanford J. Grossman & Oliver D. Hart, 1987. "One Share/One Vote and the Market for Corporate Control," NBER Working Papers 2347, National Bureau of Economic Research, Inc.
- Mester, Loretta J., 1991. "Agency costs among savings and loans," Journal of Financial Intermediation, Elsevier, vol. 1(3), pages 257-278, June.
- Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-325, June.
- 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.
- Allen N. Berger & J. David Cummins & Mary A. Weiss, 1995. "The Coexistence of Multiple Distributions Systems for Financial Services: The Case of Property-Liability Insurance," Center for Financial Institutions Working Papers 95-13, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Allen N. Berger & J. David Cummins & Mary A. Weiss, 1995. "The coexistence of multiple distribution systems for financial services: the case of property-liability insurance," Finance and Economics Discussion Series 95-22, Board of Governors of the Federal Reserve System (U.S.).
- Jensen, M.C. & Murphy, K.J., 1988.
"Performance Pay And Top Management Incentives,"
88-04, Rochester, Business - Managerial Economics Research Center.
- Murphy, Kevin J., 1985. "Corporate performance and managerial remuneration : An empirical analysis," Journal of Accounting and Economics, Elsevier, vol. 7(1-3), pages 11-42, April.
- David Roodman, 2006.
"How to Do xtabond2: An Introduction to "Difference" and "System" GMM in Stata,"
103, Center for Global Development.
- David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
- Andrei Shleifer & Robert W. Vishny, 1995.
"A Survey of Corporate Governance,"
Harvard Institute of Economic Research Working Papers
1741, Harvard - Institute of Economic Research.
- Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, "undated".
"Investor Protection and Corporate Governance,"
19455, Harvard University OpenScholar.
- La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 2000. "Investor protection and corporate governance," Scholarly Articles 29408126, Harvard University Department of Economics.
- La Porta, Rafael & Lopez-de-Silanes, Florencio & Schleifer, Andrei & Vishny, Robert, 2001. "Investor Protection and Corporate Governance," Working Paper Series rwp01-017, Harvard University, John F. Kennedy School of Government.
- Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
- Rasmusen, Eric, 1988. "Mutual Banks and Stock Banks," Journal of Law and Economics, University of Chicago Press, vol. 31(2), pages 395-421, October.
- Sahlman, William A., 1990. "The structure and governance of venture-capital organizations," Journal of Financial Economics, Elsevier, vol. 27(2), pages 473-521, October.
- repec:hrv:faseco:30728046 is not listed on IDEAS
- Joong, K.W. & mayers, D. & Smith, C.V., 1996. "On the Choice of Insurance Distribution Systems," The A. Gary Anderson Graduate School of Management 96-15, The A. Gary Anderson Graduate School of Management. University of California Riverside.
- Ingham, Hilary & Thompson, Steve, 1995. "Mutuality, Performance and Executive Compensation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(3), pages 295-308, August.
- Demsetz, Harold & Lehn, Kenneth, 1985. "The Structure of Corporate Ownership: Causes and Consequences," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1155-1177, December.
- Manuel Arellano & Stephen Bond, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies,
Oxford University Press, vol. 58(2), pages 277-297.
- Tom Doan, "undated". "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
- Lehn, Kenneth & Poulsen, Annette, 1989. " Free Cash Flow and Stockholder Gains in Going Private Transactions," Journal of Finance, American Finance Association, vol. 44(3), pages 771-787, July.
- Richard Blundell & Steve Bond, 1995.
"Initial conditions and moment restrictions in dynamic panel data models,"
IFS Working Papers
W95/17, Institute for Fiscal Studies.
- Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
- Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
- R Blundell & Steven Bond, "undated". "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
- Mathias Dewatripont & Jean Tirole, 1994.
"A Theory of Debt and Equity: Diversity of Securities and Manager-Shareholder Congruence,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 109(4), pages 1027-1054.
- Mathias Dewatripont & Jean Tirole, 1994. "A theory of debt and equity: diversity of securities and manager-shareholder congruence," ULB Institutional Repository 2013/9593, ULB -- Universite Libre de Bruxelles.
- Damian Ward, 2003. "Can Independent Distribution Function as a Mode of Corporate Governance?: An Examination of the UK Life Insurance Market," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 7(4), pages 361-384, December.
When requesting a correction, please mention this item's handle: RePEc:wly:mgtdec:v:31:y:2010:i:4:p:249-261. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.