TITLE
"Determinants of the Impact of Large Losses on Stock Returns,"
Journal of Insurance Issues,
Sprecher, C. Ronald and Mars A. Pertl, January 1986, Vol. IX,
No. 1: 1-11.
ABSTRACT
In a previous study of large losses, Sprecher and Pertl showed
that large losses have a significant impact on the return of the
firm's stock [11]. The reaction in the stock's return may be interpreted
to mean that the decline in stock's return reflects the market's
expectations about the economic impact of the loss of the firm.
Risk retention, risk transfer decisions also are made based on
their anticipated effect on the firm's resources. As a general
rule, risk exposures may be retained if they have a minimal effect
on the financial resources of the firms and transfered if the
impact is viewed as being too great.
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