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This paper examines the earnings management behavior of target insurers before mergers and acquisitions by investigating their reserving conservatism compared to control insurers. Contrary to the expectation that acquisition targets would manipulate their earnings to increase acquisition premiums, we find that target insurers are generally more conservative in their loss reserving practices before acquisitions than control firms. This finding provides support for the effectiveness of due diligence and the contractual risk shifting arguments, and the result holds regardless of whether acquirers are insurers or non‐insurers. Furthermore, we discover that target loss reserve conservatism is negatively associated with target CEO turnover post‐acquisition. In line with existing literature, we also find evidence suggesting that targets involved in stock acquisitions tend to adopt a less conservative reserving strategy than in deals that do not include stock payments. [ABSTRACT FROM AUTHOR]

Phosphinate and phosphane substituted hierarchical helicates have been prepared, and the phosphinate derivatives could be characterized in the crystal. The helicate with phosphane substituents was submitted to an orientating study on catalysis, showing its potential to act as chelating ligand for the generation of active rhodium‐based hydrogenation catalysts. [ABSTRACT FROM AUTHOR]

We present a novel method to approximate optimal feedback laws for nonlinear optimal control based on low‐rank tensor train (TT) decompositions. The approach is based on the Dirac–Frenkel variational principle with the modification that the optimization uses an empirical risk. Compared to current state‐of‐the‐art TT methods, our approach exhibits a greatly reduced computational burden while achieving comparable results. A rigorous description of the numerical scheme and demonstrations of its performance are provided. [ABSTRACT FROM AUTHOR]

Three pedestrian bridges for China China's most published bridges usually feature breathtaking size, symbolic design concepts or daring tourist attraction purposes. Bridges with glass floors over deep gorges or skybridges spanning in between high‐rise towers are attractions for mass tourist movements unknown to us in Europe. In addition to these prestigious projects, the bridge construction in China, as an important part of a huge infrastructure system, has many less known but nevertheless interesting and innovative bridges. This article presents three pedestrian bridges that were designed and built by schlaich bergermann partner in and for China within recent years and describes the special experiences and observations made during the process. [ABSTRACT FROM AUTHOR]

Dung beetles are important actors in the self‐regulation of ecosystems by driving nutrient cycling, bioturbation, and pest suppression. Urbanization and the sprawl of agricultural areas, however, destroy natural habitats and may threaten dung beetle diversity. In addition, climate change may cause shifts in geographical distribution and community composition. We used a space‐for‐time approach to test the effects of land use and climate on α‐diversity, local community specialization (H2′) on dung resources, and γ‐diversity of dung‐visiting beetles. For this, we used pitfall traps baited with four different dung types at 115 study sites, distributed over a spatial extent of 300 km × 300 km and 1000 m in elevation. Study sites were established in four local land‐use types: forests, grasslands, arable sites, and settlements, embedded in near‐natural, agricultural, or urban landscapes. Our results show that abundance and species density of dung‐visiting beetles were negatively affected by agricultural land use at both spatial scales, whereas γ‐diversity at the local scale was negatively affected by settlements and on a landscape scale equally by agricultural and urban land use. Increasing precipitation diminished dung‐visiting beetle abundance, and higher temperatures reduced community specialization on dung types and γ‐diversity. These results indicate that intensive land use and high temperatures may cause a loss in dung‐visiting beetle diversity and alter community networks. A decrease in dung‐visiting beetle diversity may disturb decomposition processes at both local and landscape scales and alter ecosystem functioning, which may lead to drastic ecological and economic damage. [ABSTRACT FROM AUTHOR]

Key pointsDiscoverability is no longer just about technology.There is a shift towards a culture of discovery.Coordinated efforts successfully create impact resonance.The author is the conductor of impact.Today, everybody needs to take responsibility for creating impact. [ABSTRACT FROM AUTHOR]

This article analyzes variations in line-of-business diversification status and extent among property-liability insurers. Our results show that the extent of diversification is not driven by risk pooling considerations; insurers operating in more volatile business lines do not diversify more. Diversification can rather be explained by the benefits of internal capital markets and barriers to business growth like market size and concentration. In our analysis, we distinguish between related and unrelated diversification. Using a measure of unrelated line-of-business diversification we find the first support for the diversification prediction of the managerial discretion hypothesis that mutual insurers should be less diversified than stock insurers. While mutual insurers tend to exhibit higher levels of total diversification, they engage in significantly less unrelated diversification than do stock insurers. [ABSTRACT FROM AUTHOR]

Unlike studies that estimate managerial bias, we utilize a direct measure of managerial bias in the U.S. insurance industry to investigate the effects of executive compensation and corporate governance on firms' earnings management behaviors. We find managers receiving larger bonuses and stock awards tend to make reserving decisions that serve to decrease firm earnings. Moreover, we examine the monitoring effect of corporate board structures in mitigating managers' reserve manipulation practices. We find managers are more likely to manipulate reserves in the presence of particular board structures. Similar results are not found when we employ traditional estimated measures of managerial bias. [ABSTRACT FROM AUTHOR]

Insurers are formally and informally monitored by a variety of stakeholders, including reinsurers, agents, outside board members, and regulators. While other studies have generally examined these stakeholders separately, they have not accounted for the fact that there is some relation among the stakeholder groups, and the presence of these groups is likely to be jointly determined. By empirically controlling for these potential interrelations, we create a more complete assessment of the impact of these stakeholders/monitors on insurers' risk taking. Specifically, we find that the presence of some stakeholders offsets the degree or presence of others, and that most stakeholders/monitors are associated with a reduction of overall firm risk. [ABSTRACT FROM AUTHOR]

This article examines the impact of ownership structure on the relation between firm performance and chief executive officer (CEO) turnover in the U.S. property-liability insurance industry. Theoretical implications of stock versus mutual ownership structures on the performance-turnover relation are ambiguous. Our empirical results indicate that CEO turnover is less responsive to firm underwriting performance in mutual insurers compared to stock insurers. In fact, we find that while CEO turnover for stock firms is negatively related to prior performance, no such relationship is found for mutual insurers. These results hold while controlling for board structure and other relevant factors. [ABSTRACT FROM AUTHOR]

Chief executive officer (CEO) turnover has long been an important topic in the academic literature. Previous research has focused mostly on the rationale for CEO turnovers, or circumstances that lead to CEO changes, with much less attention paid to how CEO turnovers affect future firm performance. We extend the literature regarding the impact of CEO turnover on performance using data for U.S. property-liability insurers. Measuring firm performance with cost efficiency (CE) and revenue efficiency (RE) scores, we find strong support for the hypothesis that firms with a CEO turnover, especially those with a nonroutine turnover, experience more favorable performance changes than firms without a CEO turnover. [ABSTRACT FROM AUTHOR]

The payment of contingent commissions in the property-liability insurance industry has long been commonplace, but recent events have made the practice highly controversial. Even prior to these events, wide variation existed among insurers in their use of contingent commissions. In this article, we examine the determinants of whether or not an insurer chooses to pay contingent commissions at all, as well as the determinants of the extent of their use for those insurers that pay them. We find a number of variables that have a significant relation to the use and extent of use of contingent commissions. [ABSTRACT FROM AUTHOR]

Issues associated with the relation between the separation of ownership and management and risk-taking behavior have been considered in an array of studies, with varying results. Due to the wide variety of ownership structures present, the property-casualty insurance industry provides an excellent setting to test the conflicting hypotheses related to separation of ownership from management and risk taking behavior. Employing a large sample of property-liability insurance companies over the period of 1996-2004, we empirically test the alternative hypotheses regarding the implications of separation of ownership from management for firms' risk taking behavior. The empirical tests include the ownership structures specified in prior research as well as a more detailed classification scheme. We find that each ownership structure is significantly different from every other ownership structure in terms of risk. [ABSTRACT FROM AUTHOR]

The existing empirical research on insurer insolvency relies almost exclusively upon individual insurance company financial data, even though the insurance industry is dominated by group-affiliated firms. This is the first study to evaluate the benefit of using group-level data to predict insurer insolvencies for group-affiliated insurers. The study uses financial ratios from the NAIC FAST scoring system, measured at both the company level and group level, as potential predictor variables. The results indicate that group-level financial information substantially improves the predictive power of an insolvency prediction model relative to a model that uses only the analogous company-level variables. In fact, the group-level variables are found to often be substantially more powerful than company-level variables in predicting individual insurer insolvencies. These results suggest that future insolvency analysis should, whenever feasible, include group-level information to obtain higher predictive accuracy. [ABSTRACT FROM AUTHOR]

This article investigates the implications of separation of ownership and control for board composition over a spectrum of ownership structures present in the U.S. property–liability insurance industry. We hypothesize that agency costs associated with manager–owner conflicts increase with the degree of separation of ownership and control. Greater agency costs imply a greater need for monitoring by outside directors on the board. Therefore, use of outside directors is expected to increase as the separation of ownership and control gets larger. Employing a sample of property–liability insurers exhibiting different degrees of separation of ownership and control, we find support for our hypothesis. [ABSTRACT FROM AUTHOR]

The bibliographies of 17 risk journals were evaluated to determine the relative influence of these risk journals on risk, insurance, and actuarial research published during the years 2001 through 2005. Tables are provided that show the frequency with which each of these journals cites itself and the other sample journals. The journals are ranked, within two groups (risk and insurance group and actuarial group), based on their total influence (total citations including and excluding self-citations) and their per article influence (per article citations including and excluding self-citations). Finally, the most frequently cited articles from each risk journal are reported. [ABSTRACT FROM AUTHOR]

Using a sample of property–liability insurers over the period 1995–2004, we develop and test a model that explains performance as a function of line-of-business diversification and other correlates. Our results indicate that undiversified insurers consistently outperform diversified insurers. In terms of accounting performance, we find a diversification penalty of at least 1 percent of return on assets or 2 percent of return on equity. These findings are robust to corrections for potential endogeneity bias, alternative risk measures, alternative diversification measures, and an alternative estimation technique. Using a market-based performance measure (Tobin's Q) we find that the market applies a significant discount to diversified insurers. The existence of a diversification penalty (and diversification discount) provides strong support for the strategic focus hypothesis. We also find that insurance groups underperform unaffiliated insurers and that stock insurers outperform mutuals. [ABSTRACT FROM AUTHOR]

We exploit the transparency of internal capital markets (ICMs) within insurance groups to investigate the activity and efficiency of ICMs within insurance groups. Specifically, we compare the relationship between internal capital transfers and investment to that between capital from other sources and investment. The ability to track the actual ICM transactions allows for more direct analysis of ICM activity than most previous studies. Consistent with theory, we find evidence that ICMs play a significant role in the investment behavior of affiliated insurers. We then use these detailed data to execute a more direct test of ICM efficiency than currently exists in the literature. Consistent with ICM efficiency, results suggest that capital is allocated to subsidiaries with the best expected performance. [ABSTRACT FROM AUTHOR]

The article examines an aspect of risk management and is a teaching tool to be used in teaching risk management in an undergraduate or master of business administration course. Such students are introduced to a type of computer software that simulates possible risk management scenarios. The simulated risk management situation portrayed is intended to teach students to think of that activity in terms of the entire organization, rather than in the are that has been affected by a particular risk.

Many articles have investigated various tools used to evaluate the financial strength of insurers. This is the first study to investigate whether certain insurers are simply inherently more difficult to evaluate than others, regardless of the tool used. The article identifies certain specific insurer characteristics that are associated with greater difficulty in financial strength evaluation, as proxied for by the level of rating disagreement by Moody's and Standard and Poor's. Specifically, the empirical results indicate that insurers that exhibit the following characteristics are more difficult to assess in terms of financial strength: smaller insurers, stock insurers, insurers with a history of reserving errors, insurers that use less reinsurance, insurers with greater levels of investment in stocks and low-grade bonds, and insurers that are more geographically diversified. [ABSTRACT FROM AUTHOR]

Grouping is a widespread and interesting phenomenon of the insurance industry, among both life-health insurers and property-liability insurers. Recognizing the potentially important implications of group membership for insurer behavior and characteristics, numerous academic researchers using insurance company data have included a dummy variable in their regression analysis to control for group membership. However, it has never been clear exactly what is being controlled for when such a variable is included. This article attempts to shed light on this question. Results indicate that group affiliated insurers tend to be larger than unaffiliated insurers, are more likely to be licensed in New York, are more likely to be stock firms than mutuals, and are likely to be less geographically concentrated. [ABSTRACT FROM AUTHOR]

Regulators, investors, consumers, and insurance brokers use insurer financial strength ratings to evaluate the insolvency risk of insurers. This article investigates the factors influencing the decision to obtain a rating or multiple ratings, the determinants of ratings for the three major insurer rating agencies, and reasons for differences in ratings across agencies. This study indicates that insurers obtain ratings to reduce ex ante uncertainty about insolvency risk. It also provides evidence that specific rating determinants and their weights differ across agencies. Evidence of sample selection bias is found only in relation to Best's ratings. [ABSTRACT FROM AUTHOR]

This study provides evidence regarding the risk-subsidy and monitoring hypotheses by investigating the relation between insider ownership and risk-taking in the property-liability insurance industry. The structure of guaranty funds provides incentives for owners to encourage insurer risk-taking. However, the ex post funding mechanism and incompleteness of guaranty funds may create monitoring incentives that inhibit risk-taking. Moreover, the extent to which managers engage in risk-taking may depend on how well their interests are aligned with those of the owners. The empirical results provide support for the risk-subsidy hypothesis and demonstrate the essential link between insider ownership and risk-taking. [ABSTRACT FROM AUTHOR]

This study investigates the differences in cash holdings across property-liability insurers. We conclude that relative cash holdings are less for insurers with better access to cash through capital markets and/or other group members. We also conclude that larger insurers, higher quality insurers, insurers that write longer tail lines of business, and firms with higher degrees of leverage hold less cash. Also, we find that insurers with a higher variance of cash flows tend to hold more cash. Another interesting finding is that, contrary to what managerial discretion arguments might suggest, stock insurers tend to hold more cash than do mutuals. [ABSTRACT FROM AUTHOR]

This article examines the regulatory stringency in insurance and the probability of being licensed in New York state. The state of New York is generally acknowledged to have the most rigorous insurance regulatory scheme of any jurisdiction in the U.S. Besides general stringency, a unique feature of New York insurance law is its extraterritoriality; an insurer licensed to do business in New York must substantially comply with any requirement applicable to similar domestic insurers in every state in which the insurer does business. The impact of New York regulation on the life insurance industry is potentially far reaching considering that over fifty-eight percent of life insurer assets in 1995 were held by New York licensed life insurers. As a consequence of the apparent unique importance of New York regulation, many empirical researchers have attempted to control for the impact of such regulation in studies of various insurance issues, typically by including a binary variable signifying whether an insurer is licensed in New York.

Analyzes the ownership structures in the life-health insurance industry. Examination of operational, financial, and institutional determinants of ownership structures; Testing of hypotheses regarding the owner-manager and the owner-policyholder incentive conflicts; Differences between the activity choices of stock life insurers and mutual life insurers.

Examines the impact of an insurer's level of insolvency risk on the prices the insurer obtains for its products in the property-liability insurance market. Use of measures of insolvency risk for those implied by option pricing model of insurance; Relation between insolvency risk and insurance prices; Penalty of insurers for default risk; Identification of firm-specific determinants of insurance prices.

A number of articles on managerial decision making have addressed the issue of whether or not to round a fractional solution to obtain a solution for a problem involving discrete alternatives. (An example is the problem in which the decision maker must select exactly one of several investment alternatives, but attaches no meaning to selecting two-thirds of one alternative and one-third of another.) Those articles which suggest that rounding can lead to undesirable answers are seemingly supported by the numerous "textbook examples" that purport to illustrate the dangers of rounding. However, the standard examples in which rounding fails to give a workable solution involve only a few rounding possibilities (usually two or four) and do not come from real world applications. Hence, it is questionable whether they provide any insight about what is likely to occur in a practical setting. This note fills a gap in previous discussions of rounding by providing two easily understood examples that dramatically portray the difficulties that rounding can encounter. The first example belongs to an important class of practical problems. We illustrate that rounding fails not only for this example, but also fails for all problems in its class. The second example is a unique "showcase" problem which can be summarized by a 5 × 5 cost matrix. This problem contains more than a million rounding alternatives, all of them infeasible! Following these examples, we present a "rounding paradox" and we show that its resolution gives analytical support to the conclusion that rounding will produce grave difficulties in a wide variety of practical situations. [ABSTRACT FROM AUTHOR]