LYONNET Victor

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We study intergenerational risk sharing taking place in one of the most common retail investment products in Europe---life insurance savings contracts---focusing on the 1.4 trillion euro French market. Using regulatory and survey data, we show that contract returns are an order of magnitude less volatile than the returns of assets backing the contracts. Contract return smoothing is achieved using reserves that absorb fluctuations in asset returns and that generate intertemporal transfers across generations of investors. We estimate the average annual amount of intergenerational transfer at 1.4% of contract value, i.e., 17 billion euros per year or 0.8% of GDP. While theory asserts that intergenerational risk sharing cannot take place in competitive markets because it relies on non-exploited return predictability, we show that: (a)~contracts returns are indeed predictable. (b)~investor flows barely react to predictable returns. (c)~observed fees offset the estimated gain from exploiting contract return predictability.

The first chapter proposes a theory of financial intermediation, which explains the reasons for the coexistence of traditional banks and shadow banks. The argument developed is that these two types of banks are complementary, which is due to their mutually beneficial interaction in times of crisis. This argument is consistent with some of the stylized facts of the financial crisis that we document. The second chapter of this thesis consists of a detailed exposition and quantification of transfers between different generations of life insurance savers. These transfers give rise to intergenerational risk sharing, made possible by the existence of market friction. We show that this friction consists of imperfect competition between life insurers. The third chapter of this thesis exposes the liquidity risks to which life insurance companies in France are subject, and studies the resulting investment decisions. The empirical approach based on the institutional specificities of life insurance - the modalities of taxation of savers - highlights the causality of liquidity risk on the investment choices of life insurers. The fourth chapter studies the conditions under which firms choose to enter a new market via the acquisition of an existing firm (external entry) rather than by using their existing resources (internal entry). We show that firms that enter a new market via an acquisition are more likely to be those whose human capital is a priori inadequate for that market.