This study explores how groups source financial support to inadequately capitalized members without compromising group-wide solvency in US nonlife insurance sector. By examining the mediating roles of affiliates’ financial decisions on the effect of focal firms’ inadequate capitalization on internal capital transfers (ICTs), we discover that affiliates raise external capital in response to focal firms’ inadequate capitalization, and affiliates’ increased financial positions via external financing translate into ICTs to focal firms. In conclusion, the present study reveals that affiliates with better financial positions and access to external financing actively source financial resources through external capital issuance in group-wide solvency management.
Ching-Yuan Hsiao (Sun,) studied this question.