Date of Award

Spring 2002

Document Type


Degree Name

Doctor of Business Administration (DBA)


Economics and Finance

First Advisor

Roger Shelor


The quality of insurance companies is a very significant societal issue. Policyholders pay premiums assuming indemnity of their potential losses. It is essential that an insurer be able to meet its contractual obligations when a loss occurs. An initial public offering provides an infusion of capital and an expansion of resources available to a firm. Thus, the objective of this study is to examine the financial and operating impacts of initial public offerings during 1980–2000 on insurance companies.

Chapter 2 examines changes in operating performance of property/casualty insurance companies following initial public offerings. I find that following initial public offerings, the underwriting performance, the solvency performance, and the overall performance of property/casualty insurers improve while the investment performance deteriorates.

Chapter 3 examines whether abnormal returns exist at the time of an IPO for insurers. I find that abnormal returns exist at the time of an IPO for property/casualty insurers and combined insurers, but not for life insurers. There is a significant difference in the abnormal returns between property/casualty companies and other randomly selected non-insurers as well as between overall insurers sampled and other randomly selected non-insurers. The results indicate that abnormal returns of insurance companies are less than abnormal returns of other non-regulated firms.

Chapter 4 examines whether there is evidence of agency problems at the time of an initial public offering. I find that the salaries, bonuses, and total values of annual pay packages for formerly privately held stock insurers significantly increases following initial public offerings. Therefore, reduced ownership by management increases agency costs. I also find that salaries and bonuses of former mutual insurers do not significantly increase in the IPO year. This result is evidence that top executives of mutual insurers may have already abused their position before demutualization.