The Impact of Diversification on Performance in the Insurance Industry: The Roles of Globalisation, Financial Reforms and Global Crisis

Meng-Fen Hsieh (), Chien-Chiang Lee () and Shih-Jui Yang
Additional contact information
Meng-Fen Hsieh: Department of Finance, National Taichung University of Science and Technology, No. 129, Sec. 3, Samin Road, Taichung 40401, Taiwan.
Shih-Jui Yang: Department of Finance, National Sun Yat-sen University, 70 Lienhai Rd., Kaohsiung 80424, Taiwan. E-mails: cclee@cm.nsysu.edu.tw; mrytc@ms10.hinet.net

The Geneva Papers on Risk and Insurance - Issues and Practice, 2015, vol. 40, issue 4, 585-631

Abstract: This paper builds on the diversity–performance relation in the cross-country literature by examining the property-liability insurance industry across 62 countries. It is, to the best of our knowledge, the first paper to explore the heterogeneity across countries over time by utilising the dynamic panel generalised method of moments approach, thus connecting directly with the current debates on the diversity–performance relation. The results show that a higher level of diversification leads to higher returns and insurers’ risk, while intending to decrease the degree of leverage. Furthermore, globalisation and financial reforms have more significant impacts on performance in non-high-income countries. The results indicate that income diversity can improve an insurer’s performance under the condition of financial reforms, but liberalisation with direct credit and interest rate control variables leads to higher competition and erodes an insurer’s profitability. During global crisis periods, insurers in high-income countries that are well diversified are able to adjust their leverage ratio faster than insurers in non-high-income countries.

Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.palgrave-journals.com/gpp/journal/v40/n4/pdf/gpp20156a.pdf Link to full text PDF (application/pdf)
http://www.palgrave-journals.com/gpp/journal/v40/n4/full/gpp20156a.html Link to full text HTML (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:gpprii:v:40:y:2015:i:4:p:585-631

Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/41288/PS2

Access Statistics for this article

The Geneva Papers on Risk and Insurance - Issues and Practice is currently edited by Christophe Courbage

More articles in The Geneva Papers on Risk and Insurance - Issues and Practice from Palgrave Macmillan, The Geneva Association Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().