The Geneva Papers on Risk and Insurance Issues and Practice

, Volume 37, Issue 3, pp 405–428

Insurance Stock Returns and Economic Growth

Authors

  • Chunyang Zhou
    • Room 502, Antai Building, Antai College of Economics & Management, Shanghai Jiao Tong University, No 535
  • Chongfeng Wu
    • Room 502, Antai Building, Antai College of Economics & Management, Shanghai Jiao Tong University, No 535
  • Donghui Li
    • School of Banking and Finance, Australian School of Business, University of New South Wales
  • Zhian Chen
    • School of Banking and Finance, Australian School of Business, University of New South Wales
Original Article

DOI: 10.1057/gpp.2012.22

Cite this article as:
Zhou, C., Wu, C., Li, D. et al. Geneva Pap Risk Insur Issues Pract (2012) 37: 405. doi:10.1057/gpp.2012.22
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Abstract

In this paper, we propose to use insurance stock returns as an indicator of insurance activities, and apply a dynamic panel technique to examine the link between the role of insurance and economic growth. Our empirical results show that after we control for the variations of market index returns, there is a significantly positive relationship between insurance stock returns and future economic growth. Furthermore, we also investigate how law environment and governance quality affect the link between the role of insurance and economic growth. The empirical results are consistent with our expectation that a well-defined law environment and governance quality facilitate the functioning of insurance companies, and strengthen the role of insurance in economic growth. We find generally that the effect of law and governance on the link between the role of insurance and economic growth is more significant in developed markets than in emerging markets.

Keywords

insurance stock returnseconomic growthlaw environmentgovernance qualitydeveloped marketsemerging markets

Copyright information

© The International Association for the Study of Insurance Economics 2012