Can We Trust Our Managers in Demutualization: Game-Theoretic Approach

Korean Insurance Journal

47 Pages Posted: 3 Apr 2010

Date Written: July 20, 2007

Abstract

Demutualization is a complicated conversion procedure whereby an insurance company changes its form of business organization from mutual to stock company. Historically, much research was performed to explain the rationale of the conversion, but mainly relied on empirical analyses. Our contribution on this issue is to develop a game-theoretical background for the demutualization process, understand the rational behavior of policyholders about the managerial decision, help policyholders to design a different demutualization procedure in order to encourage managers to act for the owners’ best interests, and furnish insurance regulators with more insight into maintaining the fairness of the procedure.

Keywords: Information Asymmetry, Managerial Compensation, Demutualization, Game Theory

Suggested Citation

Kim, Bum, Can We Trust Our Managers in Demutualization: Game-Theoretic Approach (July 20, 2007). Korean Insurance Journal, Available at SSRN: https://ssrn.com/abstract=1579927

Bum Kim (Contact Author)

Soongsil University ( email )

School of Finance
509 Venture Bldg
Seoul, Seoul
Korea, Republic of (South Korea)
82-2-820-0563 (Phone)

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