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This study examines the market reaction when announcements of large dividend increases are made by more versus less rate‐regulated firms in the same industry. The insurance industry was chosen because property/liability insurers are rate‐regulated more than life/health insurers. The abnormal returns are positive and significant for all insurers but smaller than those found in previous cross‐sectional studies. Abnormal returns for the less rate‐regulated life/health insurers during the dividend increase announcement period are significantly greater than those of the more rate‐regulated property/liability insurers.

This study examines compensation changes among top executives of formerly privately held stock insurers and mutual insurers at the time around an initial public offering. This study explains how CEO compensation changes following an IPO differ between these two types of insurers owing to their differing agency characteristics. The results also show that CEOs’ benefits increase materially following an IPO. The authors find evidence that reduced ownership retention by managers increases agency costs and CEOs of mutual insurers exploit their positions and increase their reward at the expense of policyholders.

The pace of new regulation has been quite rapid in the United States during the past fifteen years. Consider the number of major pieces of legislation that have been passed during this time span and you immediately gain insight into this fast‐paced regulatory climate. It has been argued by some that oversight during the 1980s was lax and that regulations were much less enforced than in previous decades. This may be true in certain areas such as antitrust enforcement, but there can be no doubt that the total body of regulation has been expanding continuously.