When Gambling for Resurrection is Too Risky
Electronic Access:
Free Download. Use the free Adobe Acrobat Reader to view this PDF file
Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
Summary:
Rather than taking on more risk, US insurers hit hard by the crisis pulled back from risk taking, relative to insurers not hit as hard by the crisis. Capital requirements alone do not explain this risk reduction: insurers hit hard reduced risk within assets with identical regulatory treatment. State level US insurance regulation makes it unlikely this risk reduction was driven by moral suasion. Other financial institutions also reduce risk after large shocks: the same approach applied to banks yields similar results. My results suggest that, at least in some circumstances, franchise value can dominate, making gambling for resurrection too risky.
Series:
Working Paper No. 2017/180
Subject:
Banking Bonds Corporate bonds Credit risk Financial institutions Financial regulation and supervision Insurance Insurance companies
English
Publication Date:
August 1, 2017
ISBN/ISSN:
9781484312667/1018-5941
Stock No:
WPIEA2017180
Pages:
59
Please address any questions about this title to publications@imf.org