Organization Structure and Corporate Demand for Reinsurance: The Case of the Japanese Keiretsu

31 Pages Posted: 15 May 2017

See all articles by Noriyoshi Yanase

Noriyoshi Yanase

Keio University - Faculty of Business and Commerce

Piman Limpaphayom

Sasin GIBA of Chulalongkorn University

Date Written: June 2017

Abstract

This study investigates the impact of organization structure on corporate demand for reinsurance. Previous research has shown that the unique corporate groupings in Japan known as the "keiretsu" have relatively low bankruptcy costs, low agency conflicts, low information asymmetry, and low effective taxes. These conditions should mitigate the benefits of reinsurance purchase. This conjecture is tested by examining demand for reinsurance of Japanese non‐life insurance companies during 1974–2010. Consistent with the prediction, keiretsu non‐life insurers have lower reinsurance purchase than independent non‐life insurance companies. The effects of the keiretsu structure also receded when keiretsu groupings' power was weakened after the asset bubble burst and the breakdown of the convoy system in mid 1990s. Consistent with previous studies, Japanese mutual insurers also purchase more reinsurance than stock insurers.

Suggested Citation

Yanase, Noriyoshi and Limpaphayom, Piman, Organization Structure and Corporate Demand for Reinsurance: The Case of the Japanese Keiretsu (June 2017). Journal of Risk and Insurance, Vol. 84, Issue 2, pp. 599-629, 2017, Available at SSRN: https://ssrn.com/abstract=2967610 or http://dx.doi.org/10.1111/jori.12092

Noriyoshi Yanase (Contact Author)

Keio University - Faculty of Business and Commerce ( email )

2-15-45 Mita
Minato-ku
Tokyo 108-8345
Japan
1088345 (Fax)

Piman Limpaphayom

Sasin GIBA of Chulalongkorn University ( email )

Chula 12, Phyathai Road
Bangkok, 10330
Thailand
662 2184058 (Phone)
662 2153797 (Fax)

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