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Corporate Demand for Insurance and Product Market Competition: An Empirical Investigation

  • Journal of Insurance and Finance
  • 2019, 30(2), pp.83-116
  • DOI : 10.23842/jif.2019.30.2.003
  • Publisher : Korea Insurance Research Institute
  • Research Area : Social Science > Business Management
  • Received : January 21, 2019
  • Accepted : May 16, 2019
  • Published : May 31, 2019

Yunah Song 1

1보험연구원

Accredited

ABSTRACT

The previous literature examined theoretically the existence of strategic demand for insurance and the effects of the product market competition on corporate demand for insurance. This paper examines the effects of product market competition on corporate demand for insurance. In order to test the relationship, we rely on the firm-level financial data which includes 10,908 firms in 439 industries classified according to the 5-digit Korean Standard Industrial Classification from 2007 to 2015. We adopt the fixed effect panel model together with the difference GMM, merging the firm-level data with the market competition measurements by Korea Fair Trade Commission. Contrary to the existing research, we show that stronger product market competition is associated with greater premium to sales ratio.

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