Stock Options and the Corporate Demand for Insurance

Topics:
Directors and Officers Coverage,
Property
Tags:
Business Operations,
Chinese University Of Hong Kong,
Corporate Insurance,
Finance,
Financial Planning,
Insurance,
Risk,
Stock,
Stock Option
Source:
Chinese University of Hong Kong

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Overview: The paper reports that the corporate demand for insurance rests either implicitly or explicitly on the notion that the decisions on corporate account are made to maximize the current shareholder value. (Mayers and Smith 1982) began a discussion of the determinants of the demand for corporate insurance by noting that the corporate form provides and effective hedge since stockholders can eliminate insurable risk through diversification. Equivalently, the value of the insured firm is equal to that of the uninsured firm and insurance plays no role in the management of corporate risk.

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Format: PDF | Size: 256KB | Date: Aug 2004 | Pages: 28

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