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1 – 10 of over 6000D.P. Doessel and Ruth F. Williams
The purpose of this paper is to provide an exposition of the concepts relevant to measuring the economic effect of premature mortality and the conception of how the social loss…
Abstract
Purpose
The purpose of this paper is to provide an exposition of the concepts relevant to measuring the economic effect of premature mortality and the conception of how the social loss from premature mortality can be incorporated into social welfare measurement. None of the conventional welfare measures currently pick up this welfare signal.
Design/methodology/approach
Various concepts are examined in the conventional and “new” literatures of welfare measurement. Six Venn diagrams show how various concepts “fit together”.
Findings
This paper outlines a framework for measuring the economic effect of premature mortality in a conceptually appropriate way. Thus the paper shows how the welfare loss associated with premature mortality can be incorporated into social welfare measurement.
Research limitations/implications
Accurate premature mortality measurement is difficult but this data problem hardly limits this exercise. Sensitivity analyses can alleviate this measurement problem.
Practical implications
The main practical implication is that empirical applications are feasible. Time series data can be analysed from this conceptual framework to determine whether the problem of the social loss from premature mortality is improving through time, or worsening.
Social implications
Knowing the size of the welfare impact of premature mortality is useful not only on policy fronts concerning premature mortality prevention.
Originality/value
“New welfare measurement” has not yet been applied to the notion of the social loss from premature mortality.
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Josep Tàpies and María Fernández Moya
The purpose of this article is to offer an empirical study on the particular topic of the role of values on longevity of family firms in order to open the future research agenda.
Abstract
Purpose
The purpose of this article is to offer an empirical study on the particular topic of the role of values on longevity of family firms in order to open the future research agenda.
Design/methodology/approach
To analyse the first issue, the article contrasts samples from Spain, Italy, France and Finland. The second and third issues are focused on the Spanish sample, but, to enrich the debate, Italian and French samples have also been included.
Findings
The present paper seeks to shed light on this stream of research by developing an analysis that focuses on three key elements: the ranking of values that have the most influence on family business longevity, the process of value transmission, and the condition of longevity as an asset.
Originality/value
The link between longevity and values has been pointed out by several authors, who underlined values as an important factor to support a long‐term vision, as well as a source of competitive advantage based on using values as specific company resources. Nevertheless, not many empirical works have dealt with this topic.
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Canicio Dzingirai and Nixon S. Chekenya
The life insurance industry has been exposed to high levels of longevity risk born from the mismatch between realized mortality trends and anticipated forecast. Annuity providers…
Abstract
Purpose
The life insurance industry has been exposed to high levels of longevity risk born from the mismatch between realized mortality trends and anticipated forecast. Annuity providers are exposed to extended periods of annuity payments. There are no immediate instruments in the market to counter the risk directly. This paper aims to develop appropriate instruments for hedging longevity risk and providing an insight on how existing products can be tailor-made to effectively immunize portfolios consisting of life insurance using a cointegration vector error correction model with regime-switching (RS-VECM), which enables both short-term fluctuations, through the autoregressive structure [AR(1)] and long-run equilibria using a cointegration relationship. The authors also develop synthetic products that can be used to effectively hedge longevity risk faced by life insurance and annuity providers who actively hold portfolios of life insurance products. Models are derived using South African data. The authors also derive closed-form expressions for hedge ratios associated with synthetic products written on life insurance contracts as this will provide a natural way of immunizing the associated portfolios. The authors further show how to address the current liquidity challenges in the longevity market by devising longevity swaps and develop pricing and hedging algorithms for longevity-linked securities. The use of a cointergrating relationship improves the model fitting process, as all the VECMs and RS-VECMs yield greater criteria values than their vector autoregressive model (VAR) and regime-switching vector autoregressive model (RS-VAR) counterpart’s, even though there are accruing parameters involved.
Design/methodology/approach
The market model adopted from Ngai and Sherris (2011) is a cointegration RS-VECM for this enables both short-term fluctuations, through the AR(1) and long-run equilibria using a cointegration relationship (Johansen, 1988, 1995a, 1995b), with a heteroskedasticity through the use of regime-switching. The RS-VECM is seen to have the best fit for Australian data under various model selection criteria by Sherris and Zhang (2009). Harris (1997) (Sajjad et al., 2008) also fits a regime-switching VAR model using Australian (UK and US) data to four key macroeconomic variables (market stock indices), showing that regime-switching is a significant improvement over autoregressive conditional heteroscedasticity (ARCH) and generalised autoregressive conditional heteroscedasticity (GARCH) processes in the account for volatility, evidence similar to that of Sherris and Zhang (2009) in the case of Exponential Regressive Conditional Heteroscedasticity (ERCH). Ngai and Sherris (2011) and Sherris and Zhang (2009) also fit a VAR model to Australian data with simultaneous regime-switching across many economic and financial series.
Findings
The authors develop a longevity swap using nighttime data instead of usual income measures as it yields statistically accurate results. The authors also develop longevity derivatives and annuities including variable annuities with guaranteed lifetime withdrawal benefit (GLWB) and inflation-indexed annuities. Improved market and mortality models are developed and estimated using South African data to model the underlying risks. Macroeconomic variables dependence is modeled using a cointegrating VECM as used in Ngai and Sherris (2011), which enables both short-run dependence and long-run equilibrium. Longevity swaps provide protection against longevity risk and benefit the most from hedging longevity risk. Longevity bonds are also effective as a hedging instrument in life annuities. The cost of hedging, as reflected in the price of longevity risk, has a statistically significant effect on the effectiveness of hedging options.
Research limitations/implications
This study relied on secondary data partly reported by independent institutions and the government, which may be biased because of smoothening, interpolation or extrapolation processes.
Practical implications
An examination of South Africa’s mortality based on industry experience in comparison to population mortality would demand confirmation of the analysis in this paper based on Belgian data as well as other less developed economies. This study shows that to provide inflation-indexed life annuities, there is a need for an active market for hedging inflation in South Africa. This would demand the South African Government through the help of Actuarial Society of South Africa (ASSA) to issue inflation-indexed securities which will help annuities and insurance providers immunize their portfolios from longevity risk.
Social implications
In South Africa, there is an infant market for inflation hedging and no market for longevity swaps. The effect of not being able to hedge inflation is guaranteed, and longevity swaps in annuity products is revealed to be useful and significant, particularly using developing or emerging economies as a laboratory. This study has shown that government issuance or allowing issuance, of longevity swaps, can enable insurers to manage longevity risk. If the South African Government, through ASSA, is to develop a projected mortality reference index for South Africa, this would allow the development of mortality-linked securities and longevity swaps which ultimately maximize the social welfare of life assurance policy holders.
Originality/value
The paper proposes longevity swaps and static hedging because they are simple, less costly and practical with feasible applications to the South African market, an economy of over 50 million people. As the market for MLS develops further, dynamic hedging should become possible.
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Dianne H.B. Welsh, Orlando Llanos-Contreras and Melany Rebeca Hebles
This article explains the causal mechanism supporting sustainable longevity by analysing the last three generations of one of the oldest family firms in Latin America.
Abstract
Purpose
This article explains the causal mechanism supporting sustainable longevity by analysing the last three generations of one of the oldest family firms in Latin America.
Design/methodology/approach
An explanatory single-case qualitative research based on critical realism explores why and how this family firm has been able to maintain its multigenerational longevity.
Findings
Los Lingues's evolutionary strategy, driven by transgenerational entrepreneurship under effectuation, has supported this family firm's sustainable longevity. Its effectual logic emerged mainly from the richness of the firm's historical resources embedded in its identity, knowledge and social capital and priority to preserve socioemotional wealth.
Originality/value
This study integrates socioemotional wealth and effectuation theory to explain a family firm's ability to survive through generations and sustain longevity. The study demonstrates the relevance of effectual logic in the entrepreneurial dynamics of a multigenerational family firm. Effectual logic drives the firm evolution and adaptation for sustainable longevity.
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Lobna Grissa and Lassaad Lakhal
The aim of this research is to study the direct and indirect effects among governance characteristics, long-term orientation and sustainable longevity of family firms.
Abstract
Purpose
The aim of this research is to study the direct and indirect effects among governance characteristics, long-term orientation and sustainable longevity of family firms.
Design/methodology/approach
Data were collected from 108 family firms operating in different sectors using survey questionnaires. The authors used the partial least square structural equation modeling (PLS-SEM) to examine the hypotheses of the study.
Findings
Results indicate that governance characteristics influence long-term orientation and sustainable longevity. Furthermore, results also suggest that long-term orientation partially mediates the impact of governance characteristics on sustainable longevity. These findings provide critical implications for both theory and practice.
Originality/value
The findings of the study fill gaps in the existing literature and contribute to the body of knowledge in strategic management literature by providing additional evidence of the internal drivers of corporate sustainable longevity, particularly for family SMEs in developing economies.
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Ping-fu (Brian) Lai and Wai Lun (Patrick) Cheung
This chapter introduces demographic variables in empirical regression to help find whether demographic changes have an impact on economic growth. There is evidence from estimated…
Abstract
This chapter introduces demographic variables in empirical regression to help find whether demographic changes have an impact on economic growth. There is evidence from estimated values in this chapter to suggest that there is no impact that demographic changes in Hong Kong is affecting the economic growth. The population growth has purely a transition impact where the fertility rate was low in early 2000 up to 2015 as the size of the dependency ratio increases. Besides testing demographic variables the government emphasises better education for all people of ages for prosperous growth but in fact has a negative response on educational investment on the growth of the economy. A well-educated country individual does not suggest a higher productivity in economy growth. An important implication is that there has been no single variable as yet that has seriously impacted the economy growth, but there will be changes in the coming years and has to be attended in result to avoid a diminishing economy.
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Shabir Ahmad, Rosmini Omar and Farzana Quoquab
The objective of this research is to investigate the influence of family involvement in business and innovation capability on sustainable longevity of family firms.
Abstract
Purpose
The objective of this research is to investigate the influence of family involvement in business and innovation capability on sustainable longevity of family firms.
Design/methodology/approach
Data collected from 553 executives of 200 family firms that survived to the second generation and beyond was analyzed using partial least square (PLS) approach of structural equation modeling (SEM) to test the hypotheses and validate the model.
Findings
The results provided evidence of the significant influence of family involvement in business on sustainable longevity of family firms and partial mediation of innovation capability between family involvement in business and corporate sustainable longevity.
Research limitations/implications
The sample included family firms owned and governed by the owner family. The future researchers may focus on professionally managed or publicly listed family firms.
Practical implications
The path to family firms' sustainable longevity goes through innovation capability apart from effective family control, succession, commitment to the business and family enrichment. That requires the family firm to be proactive in innovation capability.
Originality/value
Family firms are the dominant form of business representing around 80% of global business structure that strives for survival and consistently pursues sustainable longevity strategies. In the current globally competitive environment, innovation capability has become a matter of life and death for any firm. Based on the transaction cost economics (TCE) theory of family firms, this study proposes an integrative model of sustainable longevity for family firms.
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Igor Fedotenkov and Pavel Derkachev
The purpose of this paper is to explain relations between socioeconomic factors and gender longevity gap and to test a number of contradicting theories.
Abstract
Purpose
The purpose of this paper is to explain relations between socioeconomic factors and gender longevity gap and to test a number of contradicting theories.
Design/methodology/approach
Fixed effects models are used for cross-country panel data analysis.
Findings
The authors show that in developed countries (Organization for Economic Cooperation and Development and European Union) a lower gender longevity gap is associated with a higher real GDP per capita, a higher level of urbanization, lower income inequality, lower per capita alcohol consumption and a better ecological environment. An increase in women’s aggregate unemployment rate and a decline in men’s unemployment are associated with a higher gap in life expectancies. There is also some evidence that the effect of the share of women in parliaments has a U-shape; it has a better descriptive efficiency if taken with a four-year lag, which approximately corresponds to the length of political cycles.
Research limitations/implications
Findings are valid only for developed countries.
Practical implications
The findings are important for policy discussions, such as designs of pension schemes, gender-based taxation, ecological, urban, health and labor policy.
Social implications
The factors that increase male and female longevities also reduce the gender longevity gap.
Originality/value
The results contradict to a number of studies for developing countries, which show that lower economic development and greater women discrimination result in a lower gender longevity gap.
Peer review
The peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-02-2019-0082
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Miret Padovani and Paolo Vanini
The purpose of this paper is to address the issue of intergenerational and international sharing of longevity and growth risks. Current research on worldwide demographic changes…
Abstract
Purpose
The purpose of this paper is to address the issue of intergenerational and international sharing of longevity and growth risks. Current research on worldwide demographic changes highlights the importance of longevity risk on financial markets and the need to devise optimal hedging vehicles.
Design/methodology/approach
The paper presents a potential financial innovation between two countries at different stages of economic development and with different long‐term challenges. This 30‐year‐long swap is structured in such a way to capture the different timing of needed funds of the two countries and the funding capabilities of each generation: the more developed economy requires funds in the future to cover expenses for its ageing population, while the developing economy needs funds today to pay for educational, technological, and other infrastructural services. To price the swap, the paper applies an exponential‐utility‐based pricing method and defines an interval of prices allowing a contract to be agreed upon.
Findings
Via the exponential‐utility‐based pricing method, the paper shows how the bid‐ask spread varies with respect to the governments' risk and time preferences.
Originality/value
The paper is believed to be the first to illustrate the structuring and pricing of a long‐term longevity swap between two countries at different stages of economic development and to discuss practical challenges derivative structures would face if they were to implement such a strategy.
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Mariarosaria Coppola, Emilia Di Lorenzo, Albina Orlando and Marilena Sibillo
The demographic risk is the risk due to the uncertainty in the demographic scenario assumptions by which life insurance products are designed and valued. The uncertainty lies both…
Abstract
Purpose
The demographic risk is the risk due to the uncertainty in the demographic scenario assumptions by which life insurance products are designed and valued. The uncertainty lies both in the accidental (insurance risk) and systematic (longevity risk) deviations of the number of deaths from the value anticipated for it. This last component gives rise to the risk due to the randomness in the choice of the survival model for valuations (model risk or projection risk). If the insurance risk component can be assumed negligible for well‐diversified portfolios, as in the case of pension annuities, longevity risk is crucial in the actuarial valuations. The question is particularly decisive in contexts in which the longevity phenomenon of the population is strong and pension annuity portfolios constitute a meaningful slice of the financial market – both typical elements of Western economies. The paper aims to focus on the solvency appraisal for a portfolio of life annuities, deepening the impact of the demographic risk according to suitable risk indexes apt to describe its evolution in time.
Design/methodology/approach
The financial quantity proposed for representing the economic wealth of the life insurance company is the stochastic surplus, and the paper analyses the impact on it of different demographic assumptions by means of risk indicators as the projection risk index, the quantile surplus valuation and the ruin probability. By means of the proposed models, the longevity risk is mainly taken into account in a stochastic scenario for the financial risk component, in order to consider their interactions, too. In order to furnish practical details significant in the portfolio risk management, several numerical applications clarify the practical meaning of the models in the solvency context.
Findings
This paper studies the impact on the portfolio surplus of the systematic demographic risk, taking into account their interaction with the financial risk sources. In this order of ideas, the internal risk profile of a life annuity portfolio is deeply investigated by means of suitable risk indexes: in a solvency analysis perspective, some possible scenarios for the evolution of death rates (generated by different survival models) are considered and this paper evaluates the impact on the portfolio surplus caused by different choices of the demographic model. The first index is deduced by a variance decomposition formula, the other ones involve the conditional quantile calculus and the ruin probability. Such indexes constitute benchmarks, whose conjoined use provides useful information to the meeting of the solvency requirements.
Originality/value
With respect to the recent actuarial literature, in which the most important contribution on the surplus analysis has been given by Lisenko et al. – where the analysis focuses on the financial aspect applied to portfolios of temporary and endowment contracts – the paper considers life annuity portfolios, taking into account the effect of the systematic demographic risk and its interactions with the financial risk components.
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