Effort Allocation of Insurance Agent under Asymmetric Information: An Analytical Approach
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Koji Kojima
This study examines the relationship between incentive contracts for managers and the allocation of efforts by the managers as well as the stock market’s role in monitoring allocation of the efforts. It also evaluates solvency regulation in Japan and its effects on the compensation of a manager and allocation of the manager’s efforts and on the shareholders’ profits in a market with asymmetric information. Particularly, we employ a principal-agency model to demonstrate how uncertainty in the insurance market affects the way managers allocate their efforts so that their companies can achieve a higher solvency ratio in order to meet not only regulatory requirements but also stock market expectation. We find presence of a solvency margin ratio that, subject to certain conditions, increases the level of “good” effort, decreases the level of “bad” effort by the manager and increases the expected stock price.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
Artikel in diesem Heft
- Featured Article
- Joint Life Insurance Policies with Differential Benefits and Premiums to the Policyholders
- Population Growth Rate, Life Expectancy and Pension Program Improvement in China
- Modeling the Cumulative Cases from SARS
- Endowment Assurance Products: Effectiveness of Risk-Minimizing Strategies under Model Risk
- Risk-Based Pre-Funding of Guaranty Funds in Life Insurance
- Effort Allocation of Insurance Agent under Asymmetric Information: An Analytical Approach
- Country Study: Takaful Markets in Selected Asia Countries
- Book Review
- Book Review: Risk Management and Insurance: Perspectives in a Global Economy
Artikel in diesem Heft
- Featured Article
- Joint Life Insurance Policies with Differential Benefits and Premiums to the Policyholders
- Population Growth Rate, Life Expectancy and Pension Program Improvement in China
- Modeling the Cumulative Cases from SARS
- Endowment Assurance Products: Effectiveness of Risk-Minimizing Strategies under Model Risk
- Risk-Based Pre-Funding of Guaranty Funds in Life Insurance
- Effort Allocation of Insurance Agent under Asymmetric Information: An Analytical Approach
- Country Study: Takaful Markets in Selected Asia Countries
- Book Review
- Book Review: Risk Management and Insurance: Perspectives in a Global Economy
