This study deals with Investor State Dispute (ISD), which allows foreign investors to sue countries for discriminatory practices. In particular, we focus on the financial issues of the ISD lawsuit filed with the Korean government on the merger of Samsung C&T and Cheil Industries. First, the adequacy of Elliott's claim is assessed by dividing it into two cases: selling shares before the merger and holding them after the merger. First, when the price of stock purchase claim is used as the selling price of Samsung C&T before the merger, stock value exceeds the range suggested by various evaluation agencies before the merger. Second, a net present value model is proposed to calculate the profit or loss of existing shareholders if the stock is held until after the merger. In the model, shareholders' profit and loss is determined by the synergy of the merger and the appropriate merger ratio. Even if we set the consensus range suggested by the agencies at the appropriate merger ratio and assume various merger synergies, the amount of damage did not reach the amount claimed by Elliott.
This paper examines how company-specific features of Korean life insurance companies are associated with companies’ use of reinsurance. Using panel data covering 372 firm-year observations for the eighteen consecutive years from 2001 to 2018, we perform Hausman-Taylor instrumental variable estimation. We observe that higher underwriting risk, lower solvency ratio, higher financial leverage, smaller firm size, and more diversified portfolios are associated with greater use of reinsurance. In addition, It seems that life insurance companies that are a part of financial conglomerates buy more reinsurance, while foreign-owned life insurers retain more risk. Being the first empirical reinsurance study using Korean life insurance company data, this research implies that various company-specific characteristics should be considered in reinsurance decision-making in the changing life insurance market environment in Korea.
This study investigates the investment strategies of insurance investors. In particular, we focus on the difference in trading strategy between life insurance and non-life insurance.
Insurance investors take contrarian strategies by buying losers and selling winners as with prior research. Life insurance investors take contrarian strategies, while non-life insurance investors take momentum strategy. These results were consistent not only in analyses using market index and industry indices, but also in analyses using individual stocks.
This study is the first research that compared and analyzed by life insurance and non- life insurance and has great significance in that it shows there is a difference in investment strategy between the two insurers.
This study examines the effect of derivatives hedging on firm value in US publicly traded property-liability insurance firms. We find that derivatives hedging is positively related to insurer’s firm value. For non-hedging activities, derivatives usage is not found to significantly affect firm value. We also provide evidence that the positive effect of derivatives hedging on firm value is more pronounced for firms with a higher level of leverage and utilizing more reinsurance, and firms that are larger; however, the positive impact is weakened for firms that have more geographic concentration and a larger portion of long-tail lines.