Electronic Theses and Dissertations

Date of Award


Document Type


Degree Name

Ph.D. in Business Administration

First Advisor

Andre Liebenberg

Second Advisor

Stepehn Fier

Third Advisor

Matthew Henriksson


University of Mississippi

Relational Format



In the first essay, we provide a new perspective on the socially responsible investment (SRI) puzzle by examining whether a motive behind investing in socially responsible stocks is to hedge against non-financial income exposure. We examine U.S. Property-Liability (P/L) insurers’ equity portfolios to investigate the probability and extent of investments in socially responsible firms. We focus on one aspect of social responsibility - litigation risk. The level of litigation risk is a direct measure of social responsibility and the observable impact of litigation on P/L insurers’ underwriting portfolios allows us to examine the hedging motive. We find that P/L insurers with greater litigation exposure in their underwriting portfolio are more likely to hedge by tilting their stock portfolio towards low litigation risk firms. We also find that the level of reinsurance usage and reinsurance cost affect the probability and extent of P/L insurers’ investments in low litigation-risk stocks, indicating that reinsurance usage and investments in low litigation-risk stocks are substitutes in hedging against their non-financial income exposure.

The second essay examines the motivations for internal capital allocations to poorly performing insurance group members. We propose and test that internal capital markets (ICM) are used to manage the members’ underwriting portfolio. Specifically, we investigate whether insurance groups use ICM to support market entries and prevent market exits. We show that a dollar increase in ICM increases insurers’ likelihood of state-line market entry by 6.8%. Furthermore, we show that ICM decreases the likelihood of state-line market exits of poorly performing affiliates. Overall, we provide evidence that ICM affect insurers’ underwriting portfolio management.

The third essay examines whether social responsibility of corporate customers affects the performance of suppliers. We examine the relationship in the insurance industry between reinsurers (suppliers of insurance capital) and ceding insurers (reinsurers’ customers) in order to investigate the impact of ceding insurers’ social responsibility on reinsurers’ performance and underwriting risk. We propose and test that reinsurers’ performance increases and underwriting risk decreases as reinsurers supply more to ceding insurers who are more socially responsible. Overall, we find limited evidence that social responsibility of ceding insurers affects the reinsurers’ performance.



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