Two essays on corporate governance in the property-liability insurance industry
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My dissertation consists of two essays on corporate governance in the property-liability insurance industry. The first essay examines the differential disciplining forces of Chief Executive Officers (CEOs) across ownership structures by investigating the relation between performance and turnover under different ownership structures. Consistent with the managerial entrenchment hypothesis that managers are not monitored effectively in mutual insurers, I find that poor performance increases the probability of CEO turnover in stock insurers, but find no such relation in mutual insurers,. The second essay studies the implications of separation of ownership and control on board composition. The key findings are: 1. the fraction of outside directors for mutual insurers is higher than that in stock insurers; 2. among stock ownership classes, mutual owned insurers employ the most independent boards, followed by widely held insurers and then insurers closely held by others, with insurers closely held by management being associated with the least independent boards. These results strongly support the hypothesis that board independence increases with the degree of separation of ownership and control.