This thesis contributes to the issue of why corporations manage risk with insurance and financial derivative contracts. Two different empirical studies are done with data sets from Australian companies: 1) one study on reinsurance demand; and 2) one study on interest-rate-risk hedging demand from non-banking companies listed at the Australian Stock Exchange (ASX). Both studies use panel data models. A Monte Carlo simulation replicates the basic characteristics of the original data sets and allows a performance comparison among different panel data models. This thesis provides the first empirical work on insurer demand for reinsurance using Australian data. A panel-data set (1996-2001) is used, which provides 543 observations. The study finds strong evidence that larger insurers, insurers member of a group of companies, reinsurers, and captive insurers reinsure more. The impacts of leverage, taxes, and return on investments are not statistically significant. The second empirical study analyses the interest-rate-risk hedging demand with two panel data sets from 1998 to 2003 (1134 and 465 observations, respectively). Detailed information about interest-rate-risk exposures was available after manual data collection from financial reports, which was only possible due to specific reporting requirements in Australian accounting standards. A probit regression analysis confirms previous empirical results that company size is important to the decision to hedge interest rate risk in Australia. However, in relation to the analysis of the extent of hedging, the proper measurement of interest-rate-risk exposures generates some significant results different from those found in previous studies. For example, this study shows that total leverage (total debt ratio) is not significantly important to interest-rate-risk hedging demand and that, instead, this demand is related to the specific risk exposure in the interest bearing part of debt. This study finds significant relations of interest-rate-risk hedging to company size, floating-interest-rate debt ratio, annual log returns, and company industry type.
| Identifer | oai:union.ndltd.org:ADTP/242335 |
| Date | January 2006 |
| Creators | Carneiro, Luiz Augusto Ferreira, Actuarial Studies, Australian School of Business, UNSW |
| Publisher | Awarded by:University of New South Wales. School of Actuarial Studies |
| Source Sets | Australiasian Digital Theses Program |
| Language | English |
| Detected Language | English |
| Rights | Copyright Luiz Augusto Ferreira Carneiro, http://unsworks.unsw.edu.au/copyright |
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