Economics Research

Determinants of Corporate Demand for Property Insurance

Document Type : Research Paper

Authors

Saied sehhat 1
Vahid Najafi Kalyani 2
ُSaied Abbasnezhad 3

1 Faculty Member of Allameh Tabatabae’i University

2 M.A. Student of Business Management (Insurance Management) - Allameh Tabatabae’i University

3 MA Student of Business Management(Insurance Management) -Allameh Tabatabae’i University

Abstract
Motive for the purchase of insurance by individuals is differing among
the firms. Risk aversion is the main motive for the purchase of
insurance by individuals. But, incentive to purchase of insurance by
firms is affected by many factors. Researchers have argued several
theories about the motive of corporate for purchasing insurance.
Expected bankruptcy costs, tax consideration, firm size, share
ownership, operational leverage, underinvestment and type of industry
are reasons of corporate demand for insurance. In this study, we have
surveyed effective factors on the demand for property insurance by
using 1387-88 panel data of publicly listed companies operating in
Tehran Stock Exchange. Our results indicate that, consistent with our
hypotheses, large companies with high bankruptcy costs and financial
risks profiles are likely to purchase greater amounts of property
insurance than other companies. We also find that industry type have
significant effect on the purchase of property insurance by corporates.
Additionally, service companies purchase more property insurance
than other companies.  Contrary to what we expected, tax incentive,
majority shareholders and underinvestment were not found to be
important determinants of the corporate purchase of property
insurance in the publicly listed companies operating in Tehran Stock
Exchange.

Keywords

Insurance Demand
Property Insurance
Corporate Demand
Corporate Risk Management

  • Receive Date 22 February 2011
  • Revise Date 27 May 2011
  • Accept Date 26 July 2011

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