Loss Reserve Error in the Brazilian Insurance Market: empirical evidence of the response to economic and tax regulations

Revista Brasileira de Gestão De Negócios

卷:20

Marcelo Alvaro da Silva Macedo¹  Adriano Rodrigues¹  Rodrigo da Silva Santos Curvello¹ 

[1] Federal University of Rio de Janeiro;

关键词: Loss reserve error;    . Insurance.;    Earnings management.;    Tax regulation;    Economic regulation;   

DOI  :  10.7819/rbgn.v0i0.2942

来源: DOAJ

【 摘 要 】

Purpose – This study aims to investigate whether insurance companiesoperating in the property and casualty lines manage their loss reservesin order to avoid further regulatory scrutiny and/or to reduce incometax values.Design/methodology/approach – This research is empirical-analyticaland employs econometric modeling of specific discretionary accrualsapplied to a sample of 50 insurers operating in the Brazilian marketanalyzed during the period from 2008 to 2013.Findings – We found evidence of managerial discretion in loss reserveswith the purpose of managing income tax for the period and also togive the impression of better solvency to both the insurance authorityand the market, thus avoiding further regulatory intervention andfavoring asymmetry. Moreover, the best performing companies tendto overestimate their loss reserves by reducing their profits to levelsthat do not alert the regulatory authority. This can be related to thepractice of income smoothing.Originality/value – It is the first study in the Brazilian insurancemarket that utilizes the loss reserve errors in a specific accruals modelto jointly study their impacts and three motivations for managers’opportunistic behavior in relation to claims provisions.

【 授权许可】

Unknown