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- Publisher Website: 10.1017/S0022109000003586
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Article: Debt capacity, cost of debt, and corporate insurance
Title | Debt capacity, cost of debt, and corporate insurance |
---|---|
Authors | |
Issue Date | 2008 |
Publisher | Cambridge University Press. The Journal's web site is located at http://journals.cambridge.org/action/displayJournal?jid=jfq |
Citation | Journal Of Financial And Quantitative Analysis, 2008, v. 43 n. 2, p. 433-466 How to Cite? |
Abstract | Using a unique insurance dataset for a sample of Chinese publicly listed companies for the period 1997 through 2003, this study tests the simultaneous linkages between debt capacity, cost of debt, and corporate property insurance. Our results suggest that, on the one hand, a higher cost of debt appears to motivate the use of more property insurance, but high leverage alone does not lead to the purchase of more property insurance. The latter finding might reflect the unique institutional setting of China, for example, where there is a low chance of legally enforced company liquidation. Also, there is evidence that leverage can interact with tangible assets intensity and exert a positive conjoint effect on the corporate purchase of property insurance. On the other hand, we find evidence that supports that property insurance helps expand insuring firms' debt capacity and helps lower their borrowing costs. However, the moderate evidence on the cost reduction effect suggests that lowering the borrowing cost is likely to be a concern secondary to facilitating corporate borrowing and thereby expanding debt capacity in corporate property insurance decisions in China. Overall, we conclude that debt capacity, cost of debt, and corporate insurance appear to be simultaneously related. |
Persistent Identifier | http://hdl.handle.net/10722/188456 |
ISSN | 2021 Impact Factor: 4.337 2020 SCImago Journal Rankings: 4.657 |
SSRN | |
ISI Accession Number ID | |
References |
DC Field | Value | Language |
---|---|---|
dc.contributor.author | Zou, H | en_US |
dc.contributor.author | Adams, MB | en_US |
dc.date.accessioned | 2013-09-03T04:07:38Z | - |
dc.date.available | 2013-09-03T04:07:38Z | - |
dc.date.issued | 2008 | en_US |
dc.identifier.citation | Journal Of Financial And Quantitative Analysis, 2008, v. 43 n. 2, p. 433-466 | en_US |
dc.identifier.issn | 0022-1090 | en_US |
dc.identifier.uri | http://hdl.handle.net/10722/188456 | - |
dc.description.abstract | Using a unique insurance dataset for a sample of Chinese publicly listed companies for the period 1997 through 2003, this study tests the simultaneous linkages between debt capacity, cost of debt, and corporate property insurance. Our results suggest that, on the one hand, a higher cost of debt appears to motivate the use of more property insurance, but high leverage alone does not lead to the purchase of more property insurance. The latter finding might reflect the unique institutional setting of China, for example, where there is a low chance of legally enforced company liquidation. Also, there is evidence that leverage can interact with tangible assets intensity and exert a positive conjoint effect on the corporate purchase of property insurance. On the other hand, we find evidence that supports that property insurance helps expand insuring firms' debt capacity and helps lower their borrowing costs. However, the moderate evidence on the cost reduction effect suggests that lowering the borrowing cost is likely to be a concern secondary to facilitating corporate borrowing and thereby expanding debt capacity in corporate property insurance decisions in China. Overall, we conclude that debt capacity, cost of debt, and corporate insurance appear to be simultaneously related. | en_US |
dc.language | eng | en_US |
dc.publisher | Cambridge University Press. The Journal's web site is located at http://journals.cambridge.org/action/displayJournal?jid=jfq | en_US |
dc.relation.ispartof | Journal of Financial and Quantitative Analysis | en_US |
dc.title | Debt capacity, cost of debt, and corporate insurance | en_US |
dc.type | Article | en_US |
dc.identifier.email | Zou, H: hongzou@hku.hk | en_US |
dc.identifier.authority | Zou, H=rp01800 | en_US |
dc.description.nature | published_or_final_version | en_US |
dc.identifier.doi | 10.1017/S0022109000003586 | - |
dc.identifier.scopus | eid_2-s2.0-46849086373 | en_US |
dc.relation.references | http://www.scopus.com/mlt/select.url?eid=2-s2.0-46849086373&selection=ref&src=s&origin=recordpage | en_US |
dc.identifier.volume | 43 | en_US |
dc.identifier.issue | 2 | en_US |
dc.identifier.spage | 433 | en_US |
dc.identifier.epage | 466 | en_US |
dc.identifier.isi | WOS:000256586600007 | - |
dc.publisher.place | United Kingdom | en_US |
dc.identifier.ssrn | 1652543 | - |
dc.identifier.scopusauthorid | Zou, H=12769328900 | en_US |
dc.identifier.scopusauthorid | Adams, MB=7403905632 | en_US |
dc.identifier.issnl | 0022-1090 | - |