Sunflower management and life insurance: Modelling the CEO’s utility function
學年 107
學期 2
出版（發表）日期 2019-06-30
作品名稱 Sunflower management and life insurance: Modelling the CEO’s utility function
作品名稱（其他語言）
著者 Jyh-Horng Lin; Fu-Wei Huang; Shi Chen
單位
出版者
著錄名稱、卷期、頁數 Review of Behavioral Finance 11(3), p.309-323
摘要 Purpose The purpose of this paper is to develop a theoretical framework to answer the following question: What are the consequences of sunflower behavior as well as spread behavior for how asset-liability management is administrated in a life insurance company? Design/methodology/approach This paper takes into account the following: the chief executive officer (CEO) of a life insurance company confirms the board of directors’ belief – the preference of the like of higher return relative to the dislike of higher risk; the authors call such behavior sunflower management; the life insurance policyholder is entitled to a guaranteed interest rate and a participation percentage of the company’s investment surplus; and the authors examine the optimal insurer interest margin, i.e., the spread between the loan rate and the guaranteed rate. Findings Sunflower management translates into lower utility for the CEO and makes the CEO more prudent to risk-taking at an increased insurer interest margin for the provision of life insurance contracts. The effect of the guaranteed rate on the margin is ambiguous and depends on the level of guarantee itself. An increase in the participation level decreases the CEO’s loan risk-taking at an increased margin. It is shown that a trend toward higher return like of the board’s belief produces a corresponding trend toward the CEO’s decreasing risk-taking when the return like is revealed strongly. The results indicate that sunflower management as such is an important determinant in ensuring a safe insurance system. Originality/value This is the first paper to construct a contingent claim model to evaluate the expected value of the CEO’s utility function defined in terms of the equity returns and the equity risks of a life insurance company. The model explicitly considers CEO sunflower behavior, CEO spread behavior and the limited liability of shareholders.
關鍵字
語言 en
ISSN 1940-5979
期刊性質 國外
收錄於 ESCI
產學合作
通訊作者 Shi Chen
審稿制度 是
國別 GBR
公開徵稿
出版型式 ,電子版
相關連結

機構典藏連結 ( http://tkuir.lib.tku.edu.tw:8080/dspace/handle/987654321/115224 )