Portfolio rebalancing behavior with operating losses and investment regulation

M. Martin Boyer, Elicia P. Cowins, Willie D. Reddic

Research output: Contribution to journalArticlepeer-review

3 Scopus citations


Firms should make every attempt to reduce their tax burden by, for instance, preferring higher-yield taxable investments when faced with operating losses and lower-yield tax-exempt investments otherwise. We examine in this paper whether there are impediments to rebalancing which result from a firm's regulatory environment. Using an original measure of investment regulatory stringency that U.S. property and casualty insurers encounter, we find that insurers operating in more stringent regulatory environments receive a lower percentage of their investment income from taxable sources. We conclude that regulatory constraints limit insurers from rebalancing efficiently their investment portfolio in response to operational performance.

Original languageEnglish (US)
Pages (from-to)313-328
Number of pages16
JournalInternational Review of Economics and Finance
StatePublished - Sep 2019
Externally publishedYes


  • Property and casualty insurance
  • Regulatory investment limitations
  • Statutory accounting principles
  • Tax-exempt and taxable securities

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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