Philip Hardwick

An Analysis of Corporate Donations: United Kingdom Evidence

Drawing a framework from stakeholder theory, this study uses 1994 data drawn from 100 United Kingdom listed companies to test empirically whether the level of discretionary donations made by companies to charitable, social and political causes is related to four company‐specific factors, namely leverage, company size, profitability and ownership structure. Consistent with our hypotheses, the results indicate that the decision to contribute funds to charities and other bodies is positively related to company size and profitability and negatively related to leverage. However, the study provides no support for the view that there is a link between discretionary donations and a companys ownership structure.

Firm Size and Growth in the United Kingdom Life Insurance Industry

This study tests whether the organic growth rates of United Kingdom (UK) life insurance firms are independent of size, as predicted by Gibrats (1931) Law of Proportionate Effects. Using data for 1987-1996 and the three subperiods, 1987-1990, 1990-1993, and 1993-1996, we find that smaller life insurance firms tended to grow faster than larger ones in the 1987-1990 period and that larger life insurers tended to grow faster than smaller ones in the 1990-1993 and 1993-1996 periods. But over the ten-year period, we find no significant difference between the growth rates of small and large firms, thus supporting Gibrats Law as a long-run tendency in the UK life insurance industry. When we examine firm-specific determinants of asset growth, we find evidence in 1987-1996 and 1987-1990 that more diversified life insurance firms experienced higher growth rates on average than more specialized life insurers. We also find that the growth of life insurance firms was related to input costs during the 1990-1993 and 1993-1996 subperiods.

The Determinants of Credit Ratings in the United Kingdom Insurance Industry

This paper examines the determinants of external credit ratings attained by insurance firms in the United Kingdom (UK) and of the likelihood that insurers will have such an assessment. Using panel data relating to A.M. Best-rated and Standard and Poors (S&P)-rated insurers over the period 1993-1997, a trichotomous logit model and an ordered probit model with sample selection are employed to show that the factors which influence the likelihood of having external credit assessments not only vary between the two agencies but also differ from those which determine the ratings themselves. Our results are shown to be of potential interest to participants in the insurance industry and policy-makers alike. Copyright Blackwell Publishers Ltd, 2002.

The Determinants of Financial Derivatives Use in the United Kingdom Life Insurance Industry

This paper examines the determinants of financial derivatives use in the United Kingdom life insurance industry. We estimate a probit regression model and a Heckman two-stage sample selection regression model using a sample of eighty-eight U.K. life insurers in 1995. Our results indicate that the propensity to use derivative instruments is positively related to a firm’s size, leverage and international links, and negatively related to the extent of reinsurance. We also find that mutual life insurance firms have a greater propensity than stock firms to use derivatives. The positive relation with leverage and the negative relation with reinsurance support the hypothesis that U.K. life insurers use derivatives to offset risk, rather than as a speculative means of income generation. Firm size and organizational form are the main influences on the extent of financial derivatives use.

Determinants of the leasing decision in United Kingdom listed companies

The study tests empirically whether the leasing decision of United Kingdom companies is determined by four company-specific characteristics. The findings suggest that there is a positive relationship between the propensity to lease and both leverage and ownership structure. The study offers only limited support for the view that the propensity to lease is likely to fall as company size increases, and provides no support for the hypothesis that companies with more growth options in their investment opportunity sets will be more likely to lease than companies with more assets-in-place.

International trade in financial services

International trade in financial services is a topic of some importance both to the financial services sector itself and in international trade negotiations. Unfortunately, intrinsic problems in defining and measuring trade in services, combined with a lack of data in many countries, have made empirical analysis of trade in financial services difficult. Recent improvements in data, although still providing only a limited coverage, do now provide a basis for analysis. In this paper, we use data from the OECD International Trade in Services Statistics 2001 database to conduct an analysis of trade in financial services based on standard theories and empirical techniques for international trade. Our results suggest that the key concepts of international trade are of use in understanding international trade flows in financial services. In particular, we find evidence of significant volumes of intra-industry trade in financial services, as well as significant volumes of inter-industry trade for some countries, including the UK. Using Balassas ‘revealed comparative advantage’ index, the most highly ranked countries are Belgium-Luxembourg, Italy, Switzerland, the UK, the USA and Greece. Using the ‘net export ratio’, the countries that are ranked highest include Germany, Switzerland, the UK, the USA and Belgium-Luxembourg.

Tourism and empirical applications of international trade theory: a multi-country analysis

This paper examines the application of quantitative techniques to further our understanding of international trade theory with respect to tourism flows. The analyses are based on the construction of Balassa and Grubel–Lloyd Indices, as well as the construction of dynamic indices. The results of the analyses suggest that international trade theory has much to offer the study of international tourism flows. Many countries seem to specialize as both exporters and importers of tourism services. The analyses also explore the theoretical assertion that intra-industry trade is likely to be of importance in understanding international tourism flows.

Estimating Inefficiencies in Banking: A Survey:

This paper presents a review of the extensive literature concerned with estimating production and cost inefficiencies in banks. The meaning of inefficiency in this context is outlined, alternative estimation techniques are summarised and the problems of modelling the activities of banks and measuring their inputs and outputs are discussed. By including more non-US studies than previous surveys, the paper produces a more comprehensive summary and comparison of inefficiency results than has previously been attempted. The paper ends with a set of recommendations for future researchers in the area.

The UK Insurance Industry—Structure and Performance

The earliest insurance to be written in the UK was marine insurance, which was introduced into England in the 14th or 15th centuries by the Lombards from northern Italy. Alongside this early development of marine insurance came the earliest life insurance policies, the very first of which is thought to have been written in the late 16th century on the life of a merchant sailing with his goods. Fire insurance in the UK started a little later, with the first policy probably being written by the Phoenix Insurance Company (originally named the Fire Office) in 1680, just fourteen years after the Great Fire of London in September, 1666. The Great Fire destroyed much of medieval London and was an important stepping-stone in the development of fire insurance and organized fire fighting. In June 1861, the great Tooley Street fire occurred in the London docks, destroying warehouses, wharves, shops, offices and even ships. After paying out a total of about £2 million, insurance offices not surprisingly began to impose more restrictive terms on warehouses and wharves and to apply differential rates to encourage owners to think about fire precautions.

Concentration and Stability in the Mutual Building Society Industry

This article presents statistics on the changes in the structure of the mutual building society industry in the United Kingdom from 1983 to 1992. Measures of absolute and relative concentration are computed and it is shown that while the industry has experienced an increase in absolute concentration, relative concentration has decreased. Two measures of firm stability are also computed and it is shown that with the effects of mergers excluded, there has been an increase in market share and ranking instability. The study ends with a brief discussion of the relationship between concentration and stability in the context of the mutual building society industry.