Date of Award
1-1-2024
Document Type
Dissertation
Degree Name
Ph.D. in Business Administration
First Advisor
Andre Liebenberg
Second Advisor
Hailin Sang
Third Advisor
Ivonne Liebenberg
School
University of Mississippi
Relational Format
dissertation/thesis
Abstract
In the first essay, we investigate whether social preference affects institutional investors’ socially responsible investing (SRI) by examining US insurance firms. Prior literature suggests that investors value firms’ socially responsible endeavors and are willing to sacrifice financial gains when conducting SRI. We show that, on average, insurers allocate less weight to securities with high ESG (Environment, Social, and Governance) scores. However, a subset of insurers with high Corporate Social Responsibility (CSR) scores overweight high ESG securities. Moreover, we find that insurers with high CSR scores experience positive abnormal returns when they invest in high ESG stocks. This indicates that insurers take social preference into consideration when making their SRI decisions without compromising their financial gains. Additionally, we find that their social preference does not persist during times of exogenous liquidity shocks.
In the second essay, we study how actively or passively US Property & Casualty insurers manage their equity investment portfolios and test the impact of managerial discretion on the activeness of their investment strategy. We find a positive relation between the managerial discretion measure, proxied by loss reserve errors, and insurer investment activeness. Our finding suggests that higher levels of managerial discretion correspond to more active investment strategies among insurers.
In the third essay, we investigate the impact of Property and Liability (P&L) insurance group investment strategies on the investment strategies of their affiliated insurers. We find that group investment strategies exert a significant influence on their affiliates' investment strategies. These results are robust across various model specifications and machine learning algorithms-Lasso, Neural Network, and XGBoost. Further analyses using Explainable Artificial Intelligence (XAI) and Shapley Additive Explanations (SHAP) values reinforce our findings, suggesting the importance of group investment strategies in shaping affiliates' investment decisions. These results underscore the significance of considering group-level dynamics in analyzing insurance firms' investment decisions.
Recommended Citation
Bae, Sunghan, "Investment Decisions of Institutional Investors" (2024). Electronic Theses and Dissertations. 2918.
https://egrove.olemiss.edu/etd/2918