Journal
JOURNAL OF BANKING & FINANCE
Volume 61, Issue -, Pages 251-271Publisher
ELSEVIER SCIENCE BV
DOI: 10.1016/j.jbankfin.2015.09.012
Keywords
Capital structure; International finance; Regulation; Financial institutions; Insurance markets
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As financial markets become more global, the question arises whether any country specific considerations are still relevant for insurance companies' capital structure. This research examines this question with firm-level data across a broad range of countries including those in developing markets. What we find is that the optimal capital structure of insurance companies is not homogeneous across countries. We find that country-level factors explain a substantial fraction of the cross-sectional variation in insurance companies' capitalization levels. Our results add to the current policy discussion on global regulatory capital requirements. If insurer capital structure is not homogeneous across countries, a global capital standard if desired should take differences in the institutional environments across countries into account to avoid market distortions. (C) 2015 Elsevier B.V. All rights reserved.
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