- ISSN: 2155-7950
- Journal of Business and Economics
Empirical Determinants of Business Insurances in Non-financial Firms:
Are They Different from Derivatives’ Determinants?
Hassen M. Raïs
(Université de Toulouse, France)
Abstract: The scientific literature has extensively studied and analyzed the determinants of risks management and focused mainly on the hedging by derivatives. This research focuses on another kind of hedging, namely business insurances and aims to validated and measure the determinants of the implementation and use of these insurances in the non-financial firms. Based on the results of an empirical survey on practices of risk management in non- financial firms, Tobit models are developed to explain the intensity of the use of business insurances by the theoretical determinants developed by risk management theory. Two types of business insurance are analyzed: the Property and Casualty (P&C) Insurance and the Operating Loss (OL) Insurance. These models measure the relationship between level of hedging and different financial characteristics of the firm. They show that the insurance policies are determined by Investment decisions and financing options for growth, by the convexity of the tax function to pay, and diversification and regulation of the activity sector, and the original result are the convex relationship between the size and the hedging intensity.
Key words: risk, insurance, tobit model, financial ratio
JEL codes: G22, G32