The Effect of Risk Management on Direct and Indirect Capital Structure Deviations
This study explores the effect of risk management on capital structure deviations. Specifically, we innovatively classify capital structure deviations into direct and indirect deviations, with our classification being based on deviations resulting mainly from changes in either actual or target lever...
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| Format: | Article |
| Language: | English |
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MDPI AG
2024-11-01
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| Series: | Risks |
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| Online Access: | https://www.mdpi.com/2227-9091/12/12/186 |
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| _version_ | 1846102858479435776 |
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| author | Xiaoyi Li Yung-Ming Shiu |
| author_facet | Xiaoyi Li Yung-Ming Shiu |
| author_sort | Xiaoyi Li |
| collection | DOAJ |
| description | This study explores the effect of risk management on capital structure deviations. Specifically, we innovatively classify capital structure deviations into direct and indirect deviations, with our classification being based on deviations resulting mainly from changes in either actual or target leverage. Thus, if the variation in the actual leverage exceeds the variation in the target leverage, this deviation is considered direct. Conversely, if the target leverage varies more than the actual leverage, it is considered an indirect deviation. Our results reveal that risk management can help reduce these deviations, which mainly result from changes in actual leverage. We further demonstrate that insurers with direct deviations adjust their capital structure approximately 29.2% faster than insurers with indirect deviations. |
| format | Article |
| id | doaj-art-7be91b3fe76d4f5589e9ee8f91f4d6f2 |
| institution | Kabale University |
| issn | 2227-9091 |
| language | English |
| publishDate | 2024-11-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Risks |
| spelling | doaj-art-7be91b3fe76d4f5589e9ee8f91f4d6f22024-12-27T14:51:49ZengMDPI AGRisks2227-90912024-11-01121218610.3390/risks12120186The Effect of Risk Management on Direct and Indirect Capital Structure DeviationsXiaoyi Li0Yung-Ming Shiu1School of Finance, Southwestern University of Finance and Economics, 555, Liutai Avenue, Wenjiang District, Chengdu 611130, ChinaDepartment of Risk Management and Insurance, Research Fellow, Risk and Insurance Research Center, College of Commerce, National Chengchi University, 64, Sec. 2, Zhi-Nan Road, Wen-Shan District, Taipei 11605, TaiwanThis study explores the effect of risk management on capital structure deviations. Specifically, we innovatively classify capital structure deviations into direct and indirect deviations, with our classification being based on deviations resulting mainly from changes in either actual or target leverage. Thus, if the variation in the actual leverage exceeds the variation in the target leverage, this deviation is considered direct. Conversely, if the target leverage varies more than the actual leverage, it is considered an indirect deviation. Our results reveal that risk management can help reduce these deviations, which mainly result from changes in actual leverage. We further demonstrate that insurers with direct deviations adjust their capital structure approximately 29.2% faster than insurers with indirect deviations.https://www.mdpi.com/2227-9091/12/12/186risk managementreinsurancecapital structure deviationscapital structure adjustment |
| spellingShingle | Xiaoyi Li Yung-Ming Shiu The Effect of Risk Management on Direct and Indirect Capital Structure Deviations Risks risk management reinsurance capital structure deviations capital structure adjustment |
| title | The Effect of Risk Management on Direct and Indirect Capital Structure Deviations |
| title_full | The Effect of Risk Management on Direct and Indirect Capital Structure Deviations |
| title_fullStr | The Effect of Risk Management on Direct and Indirect Capital Structure Deviations |
| title_full_unstemmed | The Effect of Risk Management on Direct and Indirect Capital Structure Deviations |
| title_short | The Effect of Risk Management on Direct and Indirect Capital Structure Deviations |
| title_sort | effect of risk management on direct and indirect capital structure deviations |
| topic | risk management reinsurance capital structure deviations capital structure adjustment |
| url | https://www.mdpi.com/2227-9091/12/12/186 |
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