Journal Articles

Srbinoski, B., Poposki, K. and Bogdanovski, V. (2024), "Interconnectedness of European insurers and cat shocks contagion effects", Journal of Financial Regulation and Compliance, Vol. 32 No. 3, pp. 379-402. https://doi.org/10.1108/JFRC-10-2023-0163

Abstract

Purpose

The purpose of this paper is to examine the evolution of interconnectedness of European insurers among themselves, as well as with other non-financial firms, for the period 2000–2021 and to analyze the stock return movements around the costliest catastrophic events (hurricanes) in the past two decades.

Design/methodology/approach

This paper follows the “simple” approach of Patro et al.(2013) and examines the daily stock return correlations of the largest 30 insurers and the largest 30 non-financial firms headquartered in Europe. In addition, the study uses event study methodology to examine stock return movements around the costliest hurricanes.

Findings

We find that the European insurance sector has become highly interconnected during the past two decades; however, its increasing connectedness with non-financial firms is limited to a few firms. In addition, we find weak evidence of the destabilizing effects of catastrophic events on European insurers and non-financial firms; however, the potential for cat risk contagion effects exists as the insurance industry becomes heavily interconnected.

Originality/value

The extant literature is largely concerned with the contribution of the insurance sector to the systemic risk of the financial sector. We focus on a specific region (Europe) and analyze the evolution of interconnectedness of the largest insurers within the insurance sector as well as with the largest non-financial firms encapsulating important crisis periods. In addition, we relate to the literature that examines the market reactions around catastrophic events to test the relevance of traditional insurance activities in instigating potential contagion shocks.

Srbinoski, B. (2023). New perspectives on CESEE insurance markets. Risk Management and Insurance Review, 26, 513–518. https://doi.org/10.1111/rmir.12255

Abstract

The insurance markets of Central Eastern and Southeastern Europe (CESEE) present a unique landscape characterized by intricate geopolitical and institutional dynamics. Despite being a relatively small region, the countries within CESEE navigate a complex political and institutional environment. The development of insurance markets across CESEE is marked by considerable disparities, reflecting diverse approaches to market reforms. Despite the markets being open, a lack of competition prevails, with a pronounced presence of multinational insurance groups and their foreign affiliates. This paper provides an update on current challenges in the region. 

Srbinoski B., Poposki K., Kwon W. J. and Dencic-Mihajlov K. (2023). Greenfield foreign direct investments and insurance market diversification: a cross-country analysis. The Geneva Papers on Risk and Insurance - Issues and Practice, (In Press). https://doi.org/10.1057/s41288-023-00301-0

Abstract

Foreign direct investments (FDIs) influence insurance markets directly, through foreign insurers’ participation in domestic markets, and indirectly, through cross-sectoral spillover effects. This article focuses on the indirect effects and examines the relationship between greenfield FDIs and diversification in European insurance markets. Using panel data of 28 countries for the period 2004–2019, we find that greenfield FDIs induce greater diversification of insurance markets. Our results suggest a non-linear relationship and potential mediating effects of financial development on the FDI–insurance relationship. Robustness tests using different measures of market diversification, model specifications and averaging of the data show consistent results. 

Keywords:  Greenfield investment, foreign direct investment, insurance markets, diversification

Srbinoski B., Meceski S., and Joldeska I. (2023). Market Reactions to Government Support Packages during the Pandemic in North Macedonia. Economic Themes, 60(4). https://doi.org/10.2478/ethemes-2022-0023

Abstract

The Covid-19 crisis put pressure on governments to design immediate  support  packages  for  alleviating  the  negative  economic  consequences   for   households   and   businesses.   In   this   paper,   we   examine the stock market’s reactions to the announcements of each of the  four  support  packages  designed  by  the  Macedonian  government  during the pandemic year. We find that the magnitude, the target, and the  extent  of  realisation  of  the  support  package  mattered  how  investors   reacted   to   the   government   interventions.   The   market   positively reacted only around the second package which was mainly designed  to  support  firms’  liquidity.  Once  the  market  consumed  the  information  about  the  poor  realisation  of  the  devised  packages,  investors remained restrained and uncertain for the upcoming support package. Our findings have important policy implications by showing the differential response to the different types of support packages. 

Keywords:  Stock market, Covid-19, event study, North Macedonia

JEL classification: G01, G12, G14

Srbinoski B., Petreski B., and Petreski M. (2022). Measurement of Multidimensional Child Poverty: Evidence from North Macedonia. Child Ind Res. https://doi.org/10.1007/s12187-022-09967-9

Abstract

This study describes the multidimensionality of child poverty and produces the first multidimensional child poverty indices in North Macedonia. We use the Alkire-Foster method to develop two age-specific (0-4 years and 5-17 years) child multidimensional poverty indices (MPIs) by leveraging secondary data from Multiple Indicator Cluster Survey (MICS) 2018/2019 for North Macedonia and North Macedonia Roma Settlements. We find that the largest part of multidimensionally poor children are deprived within the range 33% - 39% of deprivations and the structure of multidimensional child poverty is similar for less, as well as for more intensely deprived children in both age-groups. Additionally, we identify the most deprived groups with respect to the area of living, ethnicity, and geographical location. The study provides general recommendations for policymakers to reduce child poverty in North Macedonia.

Keywords: Child poverty, Multidimensional poverty, North Macedonia

JEL Classification: I31, I32, J13

Stojanović, J., Srbinoski, B., and Denčić-Mihajlov, K. (2022). Do Audit and Accounting Practices Matter for Greenfield FDI Inflows? Economic Themes. 60(1): 41-56. https://doi.org/10.2478/ethemes-2022-0003

Abstract

The study examines how the strength of the application of audit  and  accounting  standards,  as  a  component  of  the  institutional  infrastructure,  affects  the  greenfield  FDI  in  the  four  countries  of  the  former  Socialist  Federal  Republic  of  Yugoslavia  over  a  twelve-year  period    (2006-2017).    Using    standard    panel    data    econometric    techniques,   we  conclude   that   stronger   application   of   audit   and   accounting  standards  has  a  positive  impact  on  attracting  greenfield  FDI,  and  that  the  strength  of  the  application  seems  to  be  more  important  in  stable  business  conditions.  Our  results  are  relevant  to  policy makers, as they point to the need for constant improvement in the    accounting    and    audit    system,    thus    encouraging    better    transparency and lower transaction costs for investors. 

Keywords:    Greenfield    foreign    direct    investments,    audit    and    accounting standards, compliance, Western Balkan countries 

JEL classification: F21, F40, М40

Srbinoski, B., Poposki, K., Born, P., and Van Hulle, K. (2022). Regulatory Examinations and Life Insurance Development. Journal of Financial Regulation and Compliance. Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JFRC-09-2021-0077

Abstract

Purpose

Solvency and market conduct regulations play a crucial role in supporting life insurance development by boosting consumer confidence and securing a stable environment for insurers to write business. The regulation encapsulates not only the legal framework but also its enforcement. This study aims to focus on the latter and investigate the impact of solvency and market conduct examinations on life insurance development within a homogenous legal environment in the USA.

Design/methodology/approach

To test the relationship between the regulatory examinations and life insurance development, this study uses annual data for 51 US states over the period 2013–2018 and uses fixed and random effects panel regressions controlling for the possible omitted variables bias and serial correlation. This study constructs two groups of indicators to measure the robustness and ability of regulators to prevent insolvencies and opportunistic market practices and estimate their effects on market development.

Findings

The results show that more stringent regulators with respect to solvency examinations deter life insurers from their markets and channel to those markets with lenient examiners, hurting the development of life insurance in the stringent states. Additionally, regulators boost consumer confidence by providing robust market conduct practices, which results in higher life insurance demand.

Originality/value

This study contributes to the debates about the pros and cons of the current state-led regulation in the USA and the general benefits/costs of regulation for insurance market development.

Keywords: Solvency, Insurance regulation, Life insurance development, Market conduct

JEL Classification: G22, G28

Srbinoski B., Petreski B., and Petreski M. (2022). The Covid-19 Impact on Exports in North Macedonia – Firm-Level Analysis. Economic Research-Ekonomska Istrazivanja. https://doi.org/10.1080/1331677X.2022.2063918

Abstract

Exports experienced extraordinary growth rates during the last decade in North Macedonia capturing above 50% share of the country’s GDP. However, the COVID-19 crisis interrupted the positive export series imposing various constraints in multiple dimensions on export-oriented firms. This study explores the multidimensionality of the COVID-19 impact on exporters in North Macedonia. We find that COVID-19 caused a systematic slowdown in the exporters’ revenue, profit, investment, capital, employment and salaries growth rates. Moreover, the limited access to finance, import exposure to EU markets, high labour-intensity, export exposure to non-EU markets and lower competitiveness make exporters less resilient to the pandemic shocks representing the main obstacles exporters are/will be facing in the recovery stage.

Keywords: Covid-19, export, firm-level analysis

JEL Classification: D22, F10, L60

Srbinoski B., Poposki K., Dencic-Mihajlov K., and Pavlovic M. (2021). The Economics of the Name Change: Long-Term Adjustments towards EU/NATO or Short-Term Resolution of Political Uncertainty? Organizations and Markets in Emerging Economies. 12(1): 86–105. https://doi.org/10.15388/omee.2021.12.49

Abstract

North Macedonia and Greece resolved the 27-year country name dispute and removed the main hurdle for North Macedonia to start the accession processes towards the EU and NATO. The paper analyzes the stock market movements around several events related to the name issue resolution to uncover whether Macedonian companies experienced stock price adjustments according to the long-term benefits/costs of joining the EU/NATO. The dynamics of the market reactions suggest that the investors reacted systematically to the short-term political uncertainty created around the referendum rather than to the long-term perspectives of the EU/NATO integration. We integrate the knowledge from the literature which explores stock market reactions to EU enlargement/exit and political elections and provide contributions for researchers and policymakers.

Srbinoski B., Poposki K., Dencic-Mihajlov K., and Pavlovic M. (2021). The Economics of the Name Change: Long-Term Adjustments towards EU/NATO or Short-Term Resolution of Political Uncertainty? Organizations and Markets in Emerging Economies. 12(1): 86–105. https://doi.org/10.15388/omee.2021.12.49

Abstract

North Macedonia and Greece resolved the 27-year country name dispute and removed the main hurdle for North Macedonia to start the accession processes towards the EU and NATO. The paper analyzes the stock market movements around several events related to the name issue resolution to uncover whether Macedonian companies experienced stock price adjustments according to the long-term benefits/costs of joining the EU/NATO. The dynamics of the market reactions suggest that the investors reacted systematically to the short-term political uncertainty created around the referendum rather than to the long-term perspectives of the EU/NATO integration. We integrate the knowledge from the literature which explores stock market reactions to EU enlargement/exit and political elections and provide contributions for researchers and policymakers.

Srbinoski B., Poposki K., Born P., and Lazzari V. (2021). Life Insurance Demand and Borrowing Constraints. Risk Management and Insurance Review. 24(1): 37-69. https://doi.org/10.1111/rmir.12166

Abstract

The literature devoted limited attention to exploring the relationship between financial development and life insurance demand. Financial development supports life insurance supply by providing confidence in the financial system, more efficient payment systems, and higher availability of financial instruments. However, financial development reduces households' needs to save by relaxing borrowing constraints, indirectly affecting life insurance demand. We contribute by providing a demand-driven explanation of the negative consequences of financial development on life insurance development. We find that more credit-constrained countries have higher life insurance penetration on average. Indirectly, the role of borrowing constraints signifies the importance of life insurance policies as a financing tool in case of the realization of various background risks. This study integrates the knowledge from life insurance theory, life insurance lapse, policy loans demand, and saving under liquidity constraints literature and produces implications for researchers, policymakers, and life insurers.

Srbinoski B., Strozzi F., Poposki K., and Born P. (2020). Trends in Life Insurance Demand and Lapse Literature. Asia-Pacific Journal of Risk and Insurance. 20190036, ISSN 1793-2157, https://doi.org/10.1515/apjri-2019-0036

Abstract

The article analyzes the interconnectedness and gaps between two interrelated streams of literature, evolving in different time periods, by employing bibliometric tools. The research on the factors of life insurance demand started in the late 1960s and early 1970s, while more intensive works on the drivers of lapses in life insurance appeared during the 2000s. We map the research fields using our own criteria to create clusters and visualize the flow of knowledge within and between the clusters employing citation network analysis (CNA). We contribute by providing the most comprehensive systematic review that integrates both fields, additionally encapsulating studies on the demand for policy loans. The article detects the most important drivers of life insurance policyholder behavior during his/her lifetime and opens new horizons for future research.

Keywords: life insurance demand; lapse; literature review; citation network analysis

JEL Codes: G22; C88