Greg Niehaus - Academia.edu (original) (raw)

Papers by Greg Niehaus

Journal of Risk and Insurance, Aug 7, 2022

Social Science Research Network, 2008

Using NASDAQ reported individual stock level trading volume, we find that analyst research covera... more Using NASDAQ reported individual stock level trading volume, we find that analyst research coverage on a stock increases the level of an affiliated broker's market share of trading volume in that stock by 0.8%, on average, which corresponds to an additional annual volume of about one million shares in an average stock. Optimistic recommendations increase the level of market share by an additional 0.3%, on average, which is consistent with the notion that analysts have an incentive to issue optimistic recommendations. Also, a broker's market share of volume increases on average when an affiliated analyst changes his/her recommendation, and decreases with the length of time during which an analyst maintains the same recommendation on a stock. The latter findings suggest that sell-side institutions are rewarded for providing new information to the market and for ongoing research services.

Social Science Research Network, 2002

The Journal of Financial Perspectives, 2017

Understanding how institutions were impacted by the financial crisis and how they responded is im... more Understanding how institutions were impacted by the financial crisis and how they responded is important for developing risk management plans that are capable of dealing with potential future crises. This paper therefore examines the impact of the financial crisis on U.S. life insurers and reviews the research on how life insurers responded to the crisis. Most life insurers were not significantly affected by the crisis, but some suffered large operating and investment losses. Regarding responses, the paper distinguishes activities that increased economic capital as well as statutory capital (e.g., cutting dividends and obtaining capital infusions) from activities that increased statutory capital without having a direct positive impact on economic capital (e.g., selling policies at a discount relative to fair value and selling securities at fire sale prices).

Financial Crises eJournal, 2017

Understanding how institutions were impacted by the financial crisis and how they responded is im... more Understanding how institutions were impacted by the financial crisis and how they responded is important for developing risk management plans that are capable of dealing with potential future crises. This paper therefore examines the impact of the financial crisis on U.S. life insurers and reviews the research on how life insurers responded to the crisis. Most life insurers were not significantly affected by the crisis, but some suffered large operating and investment losses. Regarding responses, the paper distinguishes activities that increased economic capital as well as statutory capital (e.g., cutting dividends and obtaining capital infusions) from activities that increased statutory capital without having a direct positive impact on economic capital (e.g., selling policies at a discount relative to fair value and selling securities at fire sale prices).

First draft- Do not quote without permission Acknowledgments: The authors appreciate the research... more First draft- Do not quote without permission Acknowledgments: The authors appreciate the research assistance of Congsheng Wu, Soegku Byoun, and Karen Epermanis and the generosity of Property Claims Service for providing the catastrophe loss data. Basis Risk in Catastrophe Insurance Derivative Contracts

Catastrophe insurance arrangements provide an interesting venue to examine corporate capital stru... more Catastrophe insurance arrangements provide an interesting venue to examine corporate capital structure issues. To bond promises to pay policyholder claims following major catastrophes, insurers need to hold large amounts of capital (assets in excess of the present value of expected claim payments). As a result, the cost of supplying catastrophe insurance is especially sensitive to insurers'

Firms that wish to switch from a traditional defined benefit pension plan to a defined contributi... more Firms that wish to switch from a traditional defined benefit pension plan to a defined contribution-type plan have a choice between converting to a cash balance plan or replacing the defined benefit plan with a full-fledged defined contribution plan. According to the excise tax avoidance hypothesis, firms are more likely to convert to a cash balance plan as the excess funding of the plan increases, because conversion allows the firm to avoid excise taxes on the excess assets. Our evidence supports the excise tax avoidance hypothesis. CASH BALANCE PLANS CONVERSIONS: EVIDENCE ON THE EXCISE TAX AVOIDANCE HYPOTHESES 1.

One of the main arguments for why life insurers are systemically important is that their investme... more One of the main arguments for why life insurers are systemically important is that their investment decisions are highly correlated, i.e., that life insurers herd. We analyze U.S. life insurers’ investment decisions in corporate bonds from 2002 to 2011 to provide evidence on the extent to which investment activities are correlated across companies within the life insurance industry. Based on investment herding measures from the literature, the results are consistent with life insurers exhibiting herding in corporate bonds, especially in smaller bonds with lower ratings and in bonds that have been downgraded. Moreover, we find herding is more pronounced among smaller insurers with relatively poor performance and low risk-based capital ratios. We also investigate whether insurer herding behavior is likely to be destabilizing to bond markets by examining abnormal returns prior, during, and subsequent to insurer herding. While most of the evidence does not indicate potential destabilizi...

This paper investigates the motivations for and consequences of employee ownership by comparing l... more This paper investigates the motivations for and consequences of employee ownership by comparing leveraged buyouts where a broad group of employees become equityholders to buyouts where only top level management participates (MBOs). We find that the characteristics of firms choosing EBOs correspond to predictions about when employee ownership is likely to be efficient. Control rights in EBOs are structured to mitigate conflicts between employee-owners and outside investors. As a consequence, EBOs are able to implement strategic decisions that are detrimental to employees but necessary for firm survival. Consistent with this interpretation, EBOs and MBOs exhibit similar survival characteristics . . classification code: G34 key words: LBO; employee ownership; ESOP Susan Chaplinsky, The Darden School , University of Virginia, Charlottesville, VA 22906, tel. (804) 924-4810, fax: (804) 924-4859 Greg Niehaus, College of Business Administration, University of South Carolina, Columbia, SC 29...

The purpose of this chapter is to discuss the implications of enterprise risk management (ERM) fo... more The purpose of this chapter is to discuss the implications of enterprise risk management (ERM) for the risk management process. From my perspective, ERM does not change the major steps in the traditional risk management process; instead, ERM encourages organizations to take a broader perspective and carry out a deeper analysis in each of the steps in the risk management process. More specifically, I argue that an ERM approach (1) places more emphasis on value creation as an objective of risk management, (2) emphasizes the identification of all major risks facing an organization, regardless of how they are categorized, (3) seeks to assess the aggregate risk facing the organization, and (4) considers a larger and more innovative set of methods/contracts to treat risk.

The movement of hedge fund capital into the offshore insurance/reinsurance industry, is attribute... more The movement of hedge fund capital into the offshore insurance/reinsurance industry, is attributed, in part, to the savings in personal taxes that these transactions provide the hedge fund investors. The consideration of personal taxes implies that the tax costs on insurer equity finance depends on an insurer’s investment policy (modeled here as the percentage of asset returns generated by interest, dividends, and both realized and unrealized short-term and long-term capital gains). The effects of the U.S. 2017 tax reform on the tax cost of insurer equity finance are also analyzed. Acknowledgements: The author appreciates the research assistance of Aidan Plenn and Anastasia Gracheva.

One of the main arguments for why life insurers are systemically important is that their investme... more One of the main arguments for why life insurers are systemically important is that their investment decisions are highly correlated, i.e., that life insurers herd. We analyze U.S. life insurers’ investment decisions in corporate bonds from 2002 to 2011 to provide evidence on whether investment activities are correlated across companies within the life insurance industry. Based on two herding measures, we find that on average life insurers herd in corporate bonds. Holding other factors constant, sell side herding is greater in smaller bonds, bonds with lower ratings, bonds that have been downgraded, and when insurers with low RBC ratios trade the bond. Buy side herding is greater, all else equal, when insurers that are part of a group that has been designated as a SIFI trade the bond. We also investigate whether insurer herding behavior is likely to be destabilizing to bond markets by examining abnormal returns prior, during, and subsequent to insurer herding. We find evidence that s...

More than 30 years ago, Armen Alchian (1969) posited that replacement of an inefficient division ... more More than 30 years ago, Armen Alchian (1969) posited that replacement of an inefficient division head would be “quicker ” within a conglomerate firm than if the division were a standalone firm. He ended his discussion of the issue with “But what the truth is, I do not know. ” Despite the considerable progress that has been made on organizational structure, both theoretically and empirically,

SSRN Electronic Journal

Analyzing the top 100 U.S. property-liability insurers, we find that the cost of equity capital i... more Analyzing the top 100 U.S. property-liability insurers, we find that the cost of equity capital is negatively related to insurers’ underwriting performance, but not their investment performance. The difference is attributable to opaque insurer liabilities and investor learning. We also find that the capital market and product market imperfections are important determinants of insurers’ cost of equity capital. We address endogeneity concerns using property losses from natural disasters as an instrumental variable. Overall, our evidence contributes to the important literature examining insurers’ cost of capital, and it highlights that opaque liabilities are a distinguishing feature of insurers in determining their cost of capital.

The Geneva Risk and Insurance Review

Private insurance coverage for economic losses caused by pandemics is limited. While many factors... more Private insurance coverage for economic losses caused by pandemics is limited. While many factors contribute to reduced demand and supply, we attribute the low amount of coverage to the high levels of capital that would be required to credibly insure pandemic economic losses with cross-sectional pooling mechanisms. Pooling over time significantly reduces the required capital and therefore the cost of insurance, but as a practical matter likely requires a government with the ability to borrow and tax. We also argue that insurance for economic losses due to pandemics likely generates positive externalities for the macroeconomy. We therefore analyze the general tradeoffs associated with different ways that a government can promote such insurance.

Journal of Applied Corporate Finance

Risk Management and Insurance Review

Journal of Risk and Insurance

Journal of Risk and Insurance, Aug 7, 2022

Social Science Research Network, 2008

Using NASDAQ reported individual stock level trading volume, we find that analyst research covera... more Using NASDAQ reported individual stock level trading volume, we find that analyst research coverage on a stock increases the level of an affiliated broker's market share of trading volume in that stock by 0.8%, on average, which corresponds to an additional annual volume of about one million shares in an average stock. Optimistic recommendations increase the level of market share by an additional 0.3%, on average, which is consistent with the notion that analysts have an incentive to issue optimistic recommendations. Also, a broker's market share of volume increases on average when an affiliated analyst changes his/her recommendation, and decreases with the length of time during which an analyst maintains the same recommendation on a stock. The latter findings suggest that sell-side institutions are rewarded for providing new information to the market and for ongoing research services.

Social Science Research Network, 2002

The Journal of Financial Perspectives, 2017

Understanding how institutions were impacted by the financial crisis and how they responded is im... more Understanding how institutions were impacted by the financial crisis and how they responded is important for developing risk management plans that are capable of dealing with potential future crises. This paper therefore examines the impact of the financial crisis on U.S. life insurers and reviews the research on how life insurers responded to the crisis. Most life insurers were not significantly affected by the crisis, but some suffered large operating and investment losses. Regarding responses, the paper distinguishes activities that increased economic capital as well as statutory capital (e.g., cutting dividends and obtaining capital infusions) from activities that increased statutory capital without having a direct positive impact on economic capital (e.g., selling policies at a discount relative to fair value and selling securities at fire sale prices).

Financial Crises eJournal, 2017

Understanding how institutions were impacted by the financial crisis and how they responded is im... more Understanding how institutions were impacted by the financial crisis and how they responded is important for developing risk management plans that are capable of dealing with potential future crises. This paper therefore examines the impact of the financial crisis on U.S. life insurers and reviews the research on how life insurers responded to the crisis. Most life insurers were not significantly affected by the crisis, but some suffered large operating and investment losses. Regarding responses, the paper distinguishes activities that increased economic capital as well as statutory capital (e.g., cutting dividends and obtaining capital infusions) from activities that increased statutory capital without having a direct positive impact on economic capital (e.g., selling policies at a discount relative to fair value and selling securities at fire sale prices).

First draft- Do not quote without permission Acknowledgments: The authors appreciate the research... more First draft- Do not quote without permission Acknowledgments: The authors appreciate the research assistance of Congsheng Wu, Soegku Byoun, and Karen Epermanis and the generosity of Property Claims Service for providing the catastrophe loss data. Basis Risk in Catastrophe Insurance Derivative Contracts

Catastrophe insurance arrangements provide an interesting venue to examine corporate capital stru... more Catastrophe insurance arrangements provide an interesting venue to examine corporate capital structure issues. To bond promises to pay policyholder claims following major catastrophes, insurers need to hold large amounts of capital (assets in excess of the present value of expected claim payments). As a result, the cost of supplying catastrophe insurance is especially sensitive to insurers'

Firms that wish to switch from a traditional defined benefit pension plan to a defined contributi... more Firms that wish to switch from a traditional defined benefit pension plan to a defined contribution-type plan have a choice between converting to a cash balance plan or replacing the defined benefit plan with a full-fledged defined contribution plan. According to the excise tax avoidance hypothesis, firms are more likely to convert to a cash balance plan as the excess funding of the plan increases, because conversion allows the firm to avoid excise taxes on the excess assets. Our evidence supports the excise tax avoidance hypothesis. CASH BALANCE PLANS CONVERSIONS: EVIDENCE ON THE EXCISE TAX AVOIDANCE HYPOTHESES 1.

One of the main arguments for why life insurers are systemically important is that their investme... more One of the main arguments for why life insurers are systemically important is that their investment decisions are highly correlated, i.e., that life insurers herd. We analyze U.S. life insurers’ investment decisions in corporate bonds from 2002 to 2011 to provide evidence on the extent to which investment activities are correlated across companies within the life insurance industry. Based on investment herding measures from the literature, the results are consistent with life insurers exhibiting herding in corporate bonds, especially in smaller bonds with lower ratings and in bonds that have been downgraded. Moreover, we find herding is more pronounced among smaller insurers with relatively poor performance and low risk-based capital ratios. We also investigate whether insurer herding behavior is likely to be destabilizing to bond markets by examining abnormal returns prior, during, and subsequent to insurer herding. While most of the evidence does not indicate potential destabilizi...

This paper investigates the motivations for and consequences of employee ownership by comparing l... more This paper investigates the motivations for and consequences of employee ownership by comparing leveraged buyouts where a broad group of employees become equityholders to buyouts where only top level management participates (MBOs). We find that the characteristics of firms choosing EBOs correspond to predictions about when employee ownership is likely to be efficient. Control rights in EBOs are structured to mitigate conflicts between employee-owners and outside investors. As a consequence, EBOs are able to implement strategic decisions that are detrimental to employees but necessary for firm survival. Consistent with this interpretation, EBOs and MBOs exhibit similar survival characteristics . . classification code: G34 key words: LBO; employee ownership; ESOP Susan Chaplinsky, The Darden School , University of Virginia, Charlottesville, VA 22906, tel. (804) 924-4810, fax: (804) 924-4859 Greg Niehaus, College of Business Administration, University of South Carolina, Columbia, SC 29...

The purpose of this chapter is to discuss the implications of enterprise risk management (ERM) fo... more The purpose of this chapter is to discuss the implications of enterprise risk management (ERM) for the risk management process. From my perspective, ERM does not change the major steps in the traditional risk management process; instead, ERM encourages organizations to take a broader perspective and carry out a deeper analysis in each of the steps in the risk management process. More specifically, I argue that an ERM approach (1) places more emphasis on value creation as an objective of risk management, (2) emphasizes the identification of all major risks facing an organization, regardless of how they are categorized, (3) seeks to assess the aggregate risk facing the organization, and (4) considers a larger and more innovative set of methods/contracts to treat risk.

The movement of hedge fund capital into the offshore insurance/reinsurance industry, is attribute... more The movement of hedge fund capital into the offshore insurance/reinsurance industry, is attributed, in part, to the savings in personal taxes that these transactions provide the hedge fund investors. The consideration of personal taxes implies that the tax costs on insurer equity finance depends on an insurer’s investment policy (modeled here as the percentage of asset returns generated by interest, dividends, and both realized and unrealized short-term and long-term capital gains). The effects of the U.S. 2017 tax reform on the tax cost of insurer equity finance are also analyzed. Acknowledgements: The author appreciates the research assistance of Aidan Plenn and Anastasia Gracheva.

One of the main arguments for why life insurers are systemically important is that their investme... more One of the main arguments for why life insurers are systemically important is that their investment decisions are highly correlated, i.e., that life insurers herd. We analyze U.S. life insurers’ investment decisions in corporate bonds from 2002 to 2011 to provide evidence on whether investment activities are correlated across companies within the life insurance industry. Based on two herding measures, we find that on average life insurers herd in corporate bonds. Holding other factors constant, sell side herding is greater in smaller bonds, bonds with lower ratings, bonds that have been downgraded, and when insurers with low RBC ratios trade the bond. Buy side herding is greater, all else equal, when insurers that are part of a group that has been designated as a SIFI trade the bond. We also investigate whether insurer herding behavior is likely to be destabilizing to bond markets by examining abnormal returns prior, during, and subsequent to insurer herding. We find evidence that s...

More than 30 years ago, Armen Alchian (1969) posited that replacement of an inefficient division ... more More than 30 years ago, Armen Alchian (1969) posited that replacement of an inefficient division head would be “quicker ” within a conglomerate firm than if the division were a standalone firm. He ended his discussion of the issue with “But what the truth is, I do not know. ” Despite the considerable progress that has been made on organizational structure, both theoretically and empirically,

SSRN Electronic Journal

Analyzing the top 100 U.S. property-liability insurers, we find that the cost of equity capital i... more Analyzing the top 100 U.S. property-liability insurers, we find that the cost of equity capital is negatively related to insurers’ underwriting performance, but not their investment performance. The difference is attributable to opaque insurer liabilities and investor learning. We also find that the capital market and product market imperfections are important determinants of insurers’ cost of equity capital. We address endogeneity concerns using property losses from natural disasters as an instrumental variable. Overall, our evidence contributes to the important literature examining insurers’ cost of capital, and it highlights that opaque liabilities are a distinguishing feature of insurers in determining their cost of capital.

The Geneva Risk and Insurance Review

Private insurance coverage for economic losses caused by pandemics is limited. While many factors... more Private insurance coverage for economic losses caused by pandemics is limited. While many factors contribute to reduced demand and supply, we attribute the low amount of coverage to the high levels of capital that would be required to credibly insure pandemic economic losses with cross-sectional pooling mechanisms. Pooling over time significantly reduces the required capital and therefore the cost of insurance, but as a practical matter likely requires a government with the ability to borrow and tax. We also argue that insurance for economic losses due to pandemics likely generates positive externalities for the macroeconomy. We therefore analyze the general tradeoffs associated with different ways that a government can promote such insurance.

Journal of Applied Corporate Finance

Risk Management and Insurance Review

Journal of Risk and Insurance