Abstract / Description of output
Using the capital asset pricing model it is shown that the firm will be indifferent towards insurance against specific risks. Insurance against systematic risks involves a transfer of these non‐diversifiable risks from the firm to the insurance company, and will thus only be available at a price which reflects the ‘market price of risk’. Again the firm will be indifferent towards insurance. This then leads to the investigation of alternative motivations for a firm purchasing insurance — the costs of financial distress, human capital considerations, asymmetry of information and tax laws.
| Original language | English |
|---|---|
| Pages (from-to) | 7-15 |
| Number of pages | 9 |
| Journal | Managerial and Decision Economics |
| Volume | 3 |
| Issue number | 1 |
| DOIs | |
| Publication status | Published - Mar 1982 |