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Article: Hedging Affecting Firm Value via Financing and Investment: Evidence from Property Insurance Use

TitleHedging Affecting Firm Value via Financing and Investment: Evidence from Property Insurance Use
Authors
Issue Date2010
PublisherWiley-Blackwell Publishing, Inc.. The Journal's web site is located at http://www.wiley.com/bw/journal.asp?ref=0046-3892
Citation
Financial Management, 2010, v. 39 n. 3, p. 965-996 How to Cite?
AbstractI provide evidence about the value effects of alternative risk management by examining corporate purchase of property insurance, a commonly used pure hedge of asset-loss risks. Using an insurance data set from China, I find that there is an inverted U-shape effect of the extent of property insurance use on firm value measured by several versions of Tobin's Q. Therefore, the use of property insurance, to a certain degree, has a positive effect on firm value; however, over insurance appears detrimental to firm value. Given that the inflection points occur at relatively high levels of the observed insurance spending, insurance use appears beneficial to the majority of my sample firms. The estimated average hedging premium is about 1.5%. I demonstrate that an avenue for insurance to create value in China is that it helps firms secure valuable new debt financing and enhance investment. © 2010 Financial Management Association International.
Persistent Identifierhttp://hdl.handle.net/10722/188464
ISSN
2015 Impact Factor: 0.774
2015 SCImago Journal Rankings: 0.837
SSRN
References

 

DC FieldValueLanguage
dc.contributor.authorZou, Hen_US
dc.date.accessioned2013-09-03T04:07:44Z-
dc.date.available2013-09-03T04:07:44Z-
dc.date.issued2010en_US
dc.identifier.citationFinancial Management, 2010, v. 39 n. 3, p. 965-996en_US
dc.identifier.issn0046-3892en_US
dc.identifier.urihttp://hdl.handle.net/10722/188464-
dc.description.abstractI provide evidence about the value effects of alternative risk management by examining corporate purchase of property insurance, a commonly used pure hedge of asset-loss risks. Using an insurance data set from China, I find that there is an inverted U-shape effect of the extent of property insurance use on firm value measured by several versions of Tobin's Q. Therefore, the use of property insurance, to a certain degree, has a positive effect on firm value; however, over insurance appears detrimental to firm value. Given that the inflection points occur at relatively high levels of the observed insurance spending, insurance use appears beneficial to the majority of my sample firms. The estimated average hedging premium is about 1.5%. I demonstrate that an avenue for insurance to create value in China is that it helps firms secure valuable new debt financing and enhance investment. © 2010 Financial Management Association International.en_US
dc.languageengen_US
dc.publisherWiley-Blackwell Publishing, Inc.. The Journal's web site is located at http://www.wiley.com/bw/journal.asp?ref=0046-3892en_US
dc.relation.ispartofFinancial Managementen_US
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.rightsThis is the accepted version of the following article: [Financial Management, 2010, v. 39 n. 3, p. 965-996], which has been published in final form at [http://dx.doi.org/10.1111/j.1755-053X.2010.01101.x]. In addition, authors may also transmit, print and share copies with colleagues, provided that there is no systematic distribution of the submitted version, e.g. posting on a listserve, network or automated delivery.-
dc.titleHedging Affecting Firm Value via Financing and Investment: Evidence from Property Insurance Useen_US
dc.typeArticleen_US
dc.identifier.emailZou, H: hongzou@hku.hken_US
dc.identifier.authorityZou, H=rp01800en_US
dc.description.naturepostprinten_US
dc.identifier.doi10.1111/j.1755-053X.2010.01101.xen_US
dc.identifier.scopuseid_2-s2.0-78649479369en_US
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-78649479369&selection=ref&src=s&origin=recordpageen_US
dc.identifier.volume39en_US
dc.identifier.issue3en_US
dc.identifier.spage965en_US
dc.identifier.epage996en_US
dc.publisher.placeUnited Statesen_US
dc.identifier.ssrn1652156-
dc.identifier.scopusauthoridZou, H=48663306300en_US

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