Product Liability Insurance and Enterprise Risk Management

Chen, T. J., and Huang, H. L. 2011. Product Liability Insurance and Enterprise Risk Management. NTU Management Review, 21 (2): 081-110

Tsai-Jyh Chen, Professor, Department of Risk Management and Insurance, National Chengchi University
Hui-Lin Huang, Clerk, Actuarial Department, Bank Taiwan Life Insurance Co. Ltd.

Abstract

The purpose of this paper is to study the relationship between product liability insurance and enterprise risk management. The analyses include four constructs: (1) alternative risk management tools, (2) corporate finance, (3) firm features, and (4) business operation efficiency. The empirical results support Ehrilich and Becker (1972) that insurance and other risk control programs can be complements and support Culp (2001) that risk management can play the role of efficiency enhancer in addition to the role of classical risk controller. Additionally, this study finds that risk management for product liability may stabilize the volatility of stock returns but does not increase the firm value. 


Keywords

enterprise risk management product liability risk insurance demand


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