Hardwick, P. and Adams, M., 1999. The Determinants of Financial Derivatives Use in the United Kingdom Life Insurance Industry. Abacus, 35 (2), pp. 163-184.
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Official URL: http://www.blackwell-synergy.com/links/doi/10.1111...
This paper examines the determinants of financial derivatives use in the United Kingdom life insurance industry. We estimate a probit regression model and a Heckman two-stage sample selection regression model using a sample of eighty-eight U.K. life insurers in 1995. Our results indicate that the propensity to use derivative instruments is positively related to a firm’s size, leverage and international links, and negatively related to the extent of reinsurance. We also find that mutual life insurance firms have a greater propensity than stock firms to use derivatives. The positive relation with leverage and the negative relation with reinsurance support the hypothesis that U.K. life insurers use derivatives to offset risk, rather than as a speculative means of income generation. Firm size and organizational form are the main influences on the extent of financial derivatives use.
|Uncontrolled Keywords:||Financial derivatives, life insurance, regression model|
|Subjects:||Social Sciences > Finance and Financial Economics|
|Group:||Business School > Centre for Finance and Risk|
|Deposited By:||INVALID USER|
|Deposited On:||18 Dec 2007|
|Last Modified:||07 Mar 2013 14:38|
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