The role of financial conditions in portfolio choices: The case of insurers

• 成果类型: Article
• 署名作者: Ge, Shan; Weisbach, Michael S.
• 署名单位: New York University; University System of Ohio; Ohio State University; National Bureau of Economic Research; European Corporate Governance Institute
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2021.05.019
• 发表日期: 2021
• 页码: 803-830
• 关键词: Financial conditions; INVESTMENT; insurer; Financial portfolio; Corporate bonds

摘要

Many institutional investors depend on the returns they generate to fund their operations and liabilities. How do these investors' financial conditions affect the management of their portfolios? We address this issue using the insurance industry because insurers are large investors for which detailed portfolio data are available, and can face financial shocks from exogenous weather events which help us establish causality. Among corporate bonds, for which we can control for regulatory treatment, results suggest that when Property & Ca-sualty (P&C) insurers become more constrained due to operating losses, they shift towards safer bonds. The effect of losses on allocations is likely to be causal because it holds when instrumenting for losses with weather shocks. The change in allocations following losses is larger for smaller or worse-rated insurers and during the financial crisis, suggesting that the shift toward safer securities is driven by concerns about financial flexibility. The re-sults highlight the importance of financial conditions in institutional investors' portfolio decisions. (c) 2021 Elsevier B.V. All rights reserved.