The Demise of the Mutual Organizational Form: An Investigation of the Life Insurance Industry

Journal of Money, Credit and Banking, Forthcoming

40 Pages Posted: 26 Feb 2010

See all articles by Otgontsetseg Erhemjamts

Otgontsetseg Erhemjamts

University of San Francisco

J. Tyler Leverty

University of Wisconsin - Madison

Date Written: February 24, 2010

Abstract

We investigate the role of organizational structure in financial services markets by examining the U.S. life insurance industry. Traditionally stock and mutual life insurers were equally represented, but now the industry is mainly comprised of stock firms. We find operational efficiency, access to capital, and tax savings are important determinants for this shift. The incentive to demutualize differs by the type of conversion: full demutualization is chosen for efficiency and access to capital reasons and partial conversion, using a mutual holding company, is chosen for tax savings. Firm operational efficiency improves after conversion. We also find the efficiency of the stock organizational form dominates that of the mutual structure during our sample period, 1995 to 2004.

Keywords: Insurance, Organizational Form, Demutualization, Efficiency, Tax

JEL Classification: G2, G22, G34, L2

Suggested Citation

Erhemjamts, Otgontsetseg and Leverty, J. Tyler, The Demise of the Mutual Organizational Form: An Investigation of the Life Insurance Industry (February 24, 2010). Journal of Money, Credit and Banking, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1558536 or http://dx.doi.org/10.2139/ssrn.1558536

Otgontsetseg Erhemjamts

University of San Francisco ( email )

2130 Fulton Street
San Francisco, CA 94117
United States

J. Tyler Leverty (Contact Author)

University of Wisconsin - Madison ( email )

716 Langdon Street
Madison, WI 53706-1481
United States

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
312
Abstract Views
2,236
Rank
177,421
PlumX Metrics